Short-term funding market sending strange signals
UK Court forces PM Johnson to set out a plan if he loses
Saudi excludes Yemen involvement and points finger to Iran
Macro Review The run-up to the FOMC meeting today has been overshadowed by the ongoing drama in the overnight borrowing market, dumping another $75bln of liquidity in the system after yesterday surge in the repo rate. However, the short-term funding market keeps sending strange signals after the Fed effective fund rate breached the upper bound of the target range for the first time, confirming that repo rates remain oddly elevated despite the Fed second consecutive emergency operation launched today.
Markets traded on slight risk-off mode today amid tensions in the Middle East after Saudi confirmed Iran involvement in Aramco attack and excluded Yemen responsibility. All eyes on tonight's FOMC meeting with investors looking into any changes to the previous statement regarding the assessment of geopolitical tension, which was used as the main argument to implement an (more) "insurance cut(s)". Particular attention will also turn to the FOMC Summary of Economic Projections for any indication of a shift from the "mid-cycle adjustment", previously outlined by Powell. ________________ EU Close
If you missed the morning briefing from the desk click HERE