A daily summary and commentary of events and factors that affect the global markets, with a particular emphasis on the foreign exchange markets.
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Richard Pontius Foreign Exchange Advisor
Many would agree that today is the most important day of the week. President Biden will be addressing a joint session of Congress tonight to deliver his $1.8 trillion “American Families Plan.” It has been made known that the President plans to pay for his initiative by increasing taxes on the wealthiest Americans. It is not often that a Presidential address would be upstaged but today’s conclusion of the Federal Open Market Committee (FOMC) meeting may be more closely watched by the market. Any indication of movement away from the ultra-accommodative policies by the policy-setting board could have larger implications for the financial markets.
Today’s events could come as a one-two punch. In anticipation, markets have seen very low volatility over the past few sessions, with equity markets largely unchanged, along with the dollar and global debt markets. However, while expectations are for the FOMC to continue to signal patience while ensuring that the health of the economy is sustainable, financial markets are well known to anticipate market conditions about nine months into the future. With that in mind, yields on U.S. 10-year debt are the highest they’ve been for the past two months. With the higher yields, the dollar has found a footing from a decline that has essentially lasted the entire month of April. The Fed statement will be released at 11 a.m. Pacific time, with Jerome Powell holding a press conference 30 minutes later.
In other news, the EU and U.K. have finally drawn to a close the four-year process of Brexit. The EU legislature overwhelmingly approved the Trade and Cooperation agreement. Both EU and U.K. representatives issued favorable comments following the vote. However, several issues remain that need to be worked out, and the EU has made it clear that they will not hesitate to use punitive measures should the U.K. not take the necessary steps to trade in accordance with the established agreement. Stay tuned on this one.
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