Markets In Full Risk-On Mode Ahead Of FOMC, Yield Surged With Oil
ActionForex | Jul 26, 2017 04:57AM ET
US stocks ignored policy uncertainty surrounding President Donal Trump and surged to record highs overnight. S&P 500 jumped to record high at 2477.13, up 0.29%, on strong earnings. NASDAQ also rose 0.02% to record at 6412.17. DOW jumped 0.47% to close at 21613.43, just shy of record. Surging oil price, which saw WTI reaching as high as 48.66, is another factor boosting sentiments. Meanwhile, US yields also staged a strong comeback just ahead of FOMC rate decision. 10 year yield closed up 0.072 to 2.326, scoring the largest jump in nearly 4 months. In the currency markets, Canadian Dollar is trading as the strongest major currency for the week while Yen and Swiss Franc are the weakest. Dollar and Sterling are mixed as markets await FOMC meeting and UK Q2 GDP.
The jump in treasury yield on inflation expectations is worth a note. It started with record German Ifo business sentiment that pushed 10 year bund yields up to 0.566. On the background, there was the strong rally in oil and industrial metal like copper. TNX is having its focus back on 2.396. Break there will extend the rebound from 2.103 to 2.621 high. Such development will be Yen negative.
Markets await FOMC and UK GDP
FOMC policy decision and statement will be the main focus today. The Fed would leave the policy rate unchanged but the key is whether the Fed would turn more dovish on the inflation outlook which might affect the future normalization path. The market consensus remains that there would be one more rate hike in December, which was signalled in the June dot plot. However, more and more voices of doubt about the implementation due to recent disappointment on the data front. Another focus is whether the Fed would announce the kickoff period of the balance sheet reduction plan.
Meanwhile, earlier in the day, Swiss will release UBS consumption. UK will release Q2 GDP and BBA mortgage approvals. US will also release new home sales.
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