Market Summary
Asian markets traded unchanged as investors were unwilling to commit ahead of the Federal Reserve monetary policy meeting results due Wednesday in the U.S. In addition to the Fed’s monetary policy, Asian markets will also have the Bank of Japan monetary policy statement to contend with on Thursday, which could make for some interesting action in markets.
European markets paused on Wednesday as investors were wary ahead of the U.S. Fed policy statement that was revealed after markets in Europe were closed. For the most part major indices across Europe ended with slight gains, although the Spanish IBEX35 saw a drop of 0.8% after Spanish police arrested Catalonia officials for their allege involvement in planning a vote for Catalonia’s succession from Spain.
U.S. markets were flat after the Fed’s decision to begin unwinding their $4.5 trillion asset purchase program, reducing the size of the balance sheet for the first time in nine years. The Fed kept interest rates unchanged, but indicated that an interest rate hike later this year is still on the table. Furthermore, the Fe announced that they will begin reducing the size of their Treasury holdings by $10 billion a month, and increase the monthly sales $10 billion every three months until monthly sales reach $50 billion per month.
Today’s Assets
EUR/USD
After trading above 1.2000 ahead of the Federal Reserve meeting, EUR/USD dropped more than 100 pips, crashing below 1.1900, after traders learned that another rate hike in 2017 is still being considered. The changed prospects for the U.S. interest rate and U.S. dollar could see the pair continuing lower for several sessions, though there is a strong support at the 1.1850 level.
Oil
Crude made solid gains Wednesday on expectations for OPEC to extend its production cuts that will expire in March 2018, as well as increased tensions between the U.S. and Iran. Even with the U.S. reporting a bigger than expected leap in crude inventories and production, WTI and Brent were able to gain 1.9% and 2.1% respectively.