Once again, the rise in government bond yields is acting as the catalyst for the sell off in stocks.
On the economic agenda today, the Federal Reserve meeting raised interest rates as expected to 1.25%, while maintaining expectations of a further rise this year, indicating that the labor market will continue to improve and the economy grew at an moderate pace and that the interest rate will be determined by economic data.
The markets were relatively quiet during the day and did not witness many notable moves as markets awaited the FOMC meeting to announce the rate decision. The markets have priced to raise interest rates by 94%. Markets will be waiting for comments by Janet Yellen, Federal Reserve Governor at the press conference, and to get more information about the US Federal Reserve cutting its balance sheet by about 4.5$ trillion later this year.
The economic calendar was not full of major economic events today, and the markets saw some notable moves as Sterling Pound continued to face further downward pressure, especially after Prime Minister Teresa May failed to win a majority in last Thursday's election. She is trying to make a coalition With the DUP to form a new government. Sterling fell against most of its rivals, hitting its lowest level against the US dollar for nearly a month at 1.2638.
After a week full of major events, this week comes with a lot of data and events. More than one central bank will be meeting this week to decide on interest rates, but most of the attention will be directed towards the FOMC with the possibility of a rate hike during this meeting. Next to these meetings will be some important economic data that will also play a role in market movements.
Unlike last week, the beginning of this week was full of important events that had an impact on market movements. It was the beginning in the Middle East when Saudi Arabia, Egypt, the UAE and Bahrain cut off diplomatic relations with Qatar accusing them of supporting terrorist organizations. 12 countries were with this decision. Sheikh Sabah al-Ahmad, the Emir of Kuwait tried to calm the situation, but his attempts failed, amid calls from the American side to end the siege on Qatar.
Today is filled with many important economic and political events that have attracted the attention of the markets over the past few days. As the markets have been keeping an eye on what will happen during this busy day with all these data since the beginning of this week.
The Australian dollar shrugged off data indicating that Australian economy slowed in the first quarter of this year, following strong growth in the last quarter of 2016, but reassured markets that the economy grew for the second straight quarter after contracting in the third quarter of 2016. The Australian dollar reached the highest level against the US dollar since April 24 at 0.7566 after breaching an important resistance at 0.7512.
The US dollar fell today to its lowest level in seven months, in addition to the decline of US stocks at the beginning of trading, in light of markets stay tuned of several important economic events this week.
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