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FOMC Meeting in Focus Today


Stock index futures are lower primarily due to ongoing tensions between Ukraine and Russia. In addition, investors remain cautious ahead of the U.S. Federal Reserve’s policy statement due Wednesday, with officials set to signal their first interest rate increase since 2018.

The 9:00 central time January consumer confidence index is expected to be 111.9 and the 10:00  January Richmond Federal Reserve manufacturing index is anticipated to be 14.

Today is the first day of a two-day Federal Open Market Committee meeting.

Most likely there will be no surprises from the FOMC tomorrow. However, if there are any surprises they will most likely be on the dovish side.

The dominant influence now is the geopolitical risk, followed closely by the hawkish Federal Reserve.


Safe-haven flows of funds are supporting the U.S. dollar.

The euro currency declined despite news that German business sentiment improved after six months of declines.  The Ifo business-climate index increased to 95.7 points in January from 94.8 points in December. The reading is above a consensus forecast of 94.7.

The Ifo index is based on a poll of approximately 9,000 companies in manufacturing, services, trade and construction.

The Confederation of British Industry’s quarterly gauge of manufacturing optimism in the UK dropped to -9 in the first quarter of 2022 from +2 in the previous three-month period, pointing to the weakest morale among manufacturers in a year.

In the longer term, a hawkish Bank of England will likely support the British pound. Financial futures markets have priced in up to four Bank of England interest rate hikes this year.

There was no flight to quality support again for the Japanese yen today, which is a sign of weakness.

An accommodative Bank of Japan will likely result in long-term pressure on the yen.


There was near record foreign demand for yesterday’s stellar two-year note auction. The bid-to-cover ratio was an impressive 2.811, which was the highest since April 2020 and was far above the six-auction average of 2.50.

The Treasury will auction five-year notes today.

Most analysts are predicting the FOMC will keep its fed funds rate unchanged at 0% to .25% at tomorrow’s policy meeting.

However, Federal Reserve officials will likely signal that they will raise interest rates in March for the first time in more than three years and shrink their balance sheet soon afterwards.

The International Monetary Fund has downgraded its global growth forecast for this year. In its delayed World Economic Outlook report, the IMF said it expects global gross domestic product to weaken from 5.9% in 2021 to 4.4% in 2022, with this year’s figure being 0.5 percentage points lower than previously estimated.

Some analysts believe that if the rate of growth in the U.S. economy slows, and also the global economy, it may be difficult for the Federal Reserve to maintain its recently ramped-up hawkish policy stance.

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