The strongest to the weakest of the major currencies

As the North American session begins, the NZD is the strongest and the GBP is the weakest. The FOMC rate decision will highlight the events later today with the expectation that the Federal Reserve will keep rates unchanged. Without a surprise hike, the focus will be on the details including the dot plot (the end of 2023 estimate in June was for 5.60% terminal rate and 4.6% in 2024), and the central tendencies including inflation, GDP and employment. The Chair Powell will conduct his normal press conference starting at 2:30 PM ET (and will last about 1 hour). Although there is no change expected, rates in the US have moved higher since the last meeting in July, doing the tightening work for the Fed:

  • 2-year yield is currently at 5.075%. On July 26 it was at 4.85%
  • 5-year yield is currently at 4.492%. On July 16 it was at 4.118%
  • 10-year yield is currently at 4.347%. On July 26 it was at 3.871%
  • 30-year yield is currently at 4.418%. On July 26 it was at 3.937%

The USD is mostly lower today with declines mainly focused in AUD and NZD (-0.54% and -0.50%). The greenback is also lower vs the EUR and CAD (-0.21% and -0.16%). The USD is higher vs the GBP after their inflation rate unexpectedly slowed today, leading to speculation that the Bank of England (BoE) might pause its interest rate hikes when they meet and announce its rate decision on Thursday. August's consumer price index dropped to 6.7%, contrary to expectations of 7.0% (and down from 6.8% last month). The decline has raised questions about the BoE's next steps and make the decision more of a toss-up. The BOE has hiked 14 consecutive meeting taking the rate to 5.25% which is the highest rate since 2008. Factors like reduced hotel prices and airfares contributed to the slowdown, but were offset by rising global fuel prices and alcohol taxes. Despite the drop, the UK's inflation remains high in Western Europe. Last week, the European Central Bank increased its rates (but hinted it may be the end). The UK government views the recent data positively, emphasizing the need for further inflation reduction. Future indicators hint at easing inflationary pressures. The GBPUSD did move to the lowest level since May 31 but has rebounded back above the lows from Monday and Tuesday near 1.2368.

US stock futures are implying a steady to marginally higher open. Yields are marginally lower. Oil prices are trading lower, retreating from their 10-month peak. The decline comes despite the private inventory data released late yesterday showing a drawdown of over 5 million barrels in U.S. crude inventories last week. The official EIA data will be released at 10:30 AM ET. Despite the significant inventory reduction, traders appear to be securing profits in anticipation of the Federal Reserve's interest rate decision. This follows concerns of a major supply shortage that previously drove prices to their highest since November of the prior year. The estimates are for a -2.2M drawdown in the crude stocks.

A snapshot of the markets as the NA session gets underway shows:

  • Crude oil is trading down $0.71 or -0.78% at $89.77
  • Spot gold is trading up $0.66 or 0.04% at $1932
  • Spot silver is trading up $0.09 or 0.40% at $23.27
  • Bitcoin is trading at $27,097. At this time yesterday the price was trading a little higher at $27,218.

In the US premarket for US stocks, major indices are trading modestly higher after closing modestly lower yesterday

  • Dow Industrial Average futures are implying a rise of 78 points after yesterday's fall of -106.57 points
  • S&P index futures are implying a gain of 9.30 points after yesterday's fall of -9.58 points
  • NASDAQ futures are implying a gain of 30.5 points after yesterday's fall of -32.05 points

In the European equity markets, the major indices are higher

  • German DAX, +0.62%
  • France's CAC, +0.49%
  • UK's FTSE 100, +0.73% %
  • Spain's Ibex, +1.18%
  • Italy's FTSE MIB, +1.31% (delayed)

In the Asian Pacific today, equity markets closed lower

  • Japan’s Nikkei 225, fell -0.66%
  • China’s Shanghai Composite, fell -0.52%
  • Hong Kong’s Hang Seng, fell -0.62%
  • Australia’s S&P/ASX 200, fell -0.46%

In the US debt market, yields are mixed/little changed.

  • 2-year yield, 5.07% -3.8 basis points
  • 5-year yield, 4.486% -3.5 basis points
  • 10-year yield, 4.342% -2.4 basis points
  • 30-year yield, 4.413% -1.5 basis points

In the European debt market, benchmark 10-year yields are trading lower with the UK tenure leading the way with a decline of -9.1 basis points

European benchmark 10 year yields