FOMC policy decision on focus
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FOMC policy decision on focus

The Federal Reserve will conclude with phasing out its monthly bond purchases later Wednesday following its two-day meeting. According to market expectations, the central bank will reduce its bond-buying purchases by 15 billion dollars per month, meaning that the tapering process of 120 billion dollars will be complete in eight months.

If, as some Fed officials have argued in recent weeks, the Fed moves toward a faster timeline, there is, therefore, a chance for a hawkish surprise.

It remains to be seen whether a hawkish tone will result in higher interest rates anytime soon.

As other central banks signal a more hawkish stance amid inflationary pressures, investors will be watching closely for Powell's assessment of rising prices tonight.

Bonds slid ahead of Fed meeting

In response to waning global bond markets, the 10-year Treasury yields fell to 18-day lows on Wednesday, unwinding some of the recent aggressive bets on rates hike.

Eurozone yields also fell as European Central Bank president Christine Lagarde said a rate hike next year was "very unlikely". Compared to a week ago, just one ECB hike is now priced for 2022, down from two.

German 10-year bond yields declined further to -0.194%. The 10-year bond yield in Italy was last down almost 5.5 basis points on the day at 1.03%. However, as traders stayed ahead of the Federal Reserve meeting, the euro did not move after Lagarde's comments, remaining at 1.15900.

Upbeat data lent a support to sterling

Purchasing Managers' Index (PMI) from IHS Markit shows improvement, as British businesses reported faster growth in October. The IHS Markit PMI shot up to 57.8 in October from 54.9 in September, topping an initial flash estimate of 56.8.

Reduced COVID-19 testing, and quarantine requirements led to higher foreign travel bookings, which increased the narrower services PMI to 59.1, a three-month high from 55.4 in September.

On the back of upbeat UK data, GBPUSD is holding onto its intraday gains. The pair is trading above the key level of the 1.36000 mark.

Oil sellers are back in their seats

As OPEC+ is under growing pressure to increase supply, crude prices fell Wednesday following a significant increase in US crude inventories.

According to the American Petroleum Institute, US crude stocks rose by 3.6 million barrels for the week ended Oct. 29, setting the stage for the official US Energy Information Administration report later today.

OPEC+ meets on Thursday to discuss the state of production across the globe.

Crude is on the back foot for the second consecutive day, battling the ascending support line from early October. Diverging RSI keeps bears hopeful of reaching the 80 mark as an immediate support level. The price will likely fall toward the 78.80 and 77 hurdles if negative momentum persists.

On the flip side, bulls need to break through the previous top at 84.94 to resume the prior uptrend.

Events of the day

Wednesday's will be busy with various data releases as investors await ADP payrolls, September factory orders, and ISM non-manufacturing PMI index. They are also closely monitoring the upcoming FOMC statement and Powel's speech for clues on the next direction of the USD.