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Markets await Fed rate decision, 25bps rise expected but its all about the statement

Good morning


We have seen a bit of USD weakness ahead of this evenings FOMC decision. GBP has been a beneficiary, with GBPUSD having traded up to just above 1.2900, now 1.2890, USDJPY has traded lower from a peak yesterday of 141.70 to 140.60 and even EURUSD has managed to push up from yesterdays lows around 1.1020 to 1.1070. A 25bps rise from the Fed is expected, it is likely to be the tone of the statement that dictates the direction of the dollar.


There is another 25bps priced in beyond this meeting, any hint of another pause or even rates reaching a peak could send the USD lower although I do think Powell is likely to keep the door open for further rate rises rather than completely dismiss them. On the other hand, a signal from Powell that rate rises are resuming after their recent pause and that there is more to come could see USD regain some of the ground lost over recent days. Data has remained resilient in the US, the economy is doing OK despite the rate rises so its surely more likely Powell will err on the hawkish side.


Lower than expected Aussie inflation numbers overnight sent AUD lower, GBPAUD traded up from the mid-1.89s to 1.9135 on the announcement although soon settled back to 1.9065, where we now trade. The lower readings should take the heat off RBA for a while.


USDCNY fixed lower at 7.1295, China remain determined to prevent CNY depreciation and seem to have set their line in the sand around the 7.1500 area for the time being. Some interest over the replacement of China Foreign Minister Qin Gang who has been absent for a month or so. No real news of where he is or why he’s been replaced, there had been a mention of health issues, there had also been rumours he’d had an affair, but we have nothing concrete. Could be something simple like he was getting too popular and Xi didn’t like that to got rid of him. Wang Yi takes over the role.


In other news, my wife is wondering why I didn’t become a professional footballer as it is reported Mbappe will be on a salary in the region of £600m+/year or £11.6m/week if he joins the Saudi league. Impossible money to turn down. I know Saudi Arabian teams have been splashing vast sums of money around to lure top players to the Saudi league but this really take it to another level. Are we all going to start watching Saudi football? I don’t think so. But football is pretty global. Europe may not tune in to Saudi football but perhaps the rest of the world, particularly Asia, will. China tried to buy football some years ago, Saudi seem to be trying the same thing.


I’m off to Italy next week for a whirlwind tour of Venice and Rome. I’ve been watching the weather of course and can’t quite work out what is going on. The north have seen storms with hail stones the size of tennis balls weather, torrential rains and ridiculous winds, while Sicily has been hit by wildfires after temperatures reached high 40’s on Monday. Incredible footage of the two weather extremes are available online.

Went to the cinema yesterday evening for the second time in two days, this time it was to see the latest Mission Impossible film. I’ll give nothing away other than to say it was a pretty good film, weirdly it was set in the same Italian cities I’ll be visiting, Venice and Rome. This means nothing at all of course, but was a bit odd that of all the places in the world, they chose to film in the exact places I’m visiting. I’ll be on the lookout for baddies anway….


- 15.00 US new home sales

- 19.00 FOMC rate announcement

- 19.30 FOMC press conference


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