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Dollar firms up broadly in early US session as markets are awaiting FOMC rate decision. A 25bps hike is widely expected and there is no change for Fed to disappoint. The tricky part is the new economic projections which could make or break Dollar' rebound. At the time of writing, Yen and Canadian Dollar are trading as the second strongest ones. Swiss Franc suffers another day of deep, broad based selling today and it's followed by Euro and the Sterling as the weakest ones. Australian Dollar was lifted rather briefly by the rebound in Chinese stocks earlier today. But it's losing steam into US session.

In other markets, major European indices are mixed at the time of writing. FTSE is down -0.02%, DAX down -0.18% and CAC up 0.34%. Germany 10 year bund yield is down slightly by -0.008 at 0.539 but stays very firm above 0.5 handle. Earlier today, Nikkei closed up 0.39%, Singapore Strait Times up 0.09%, Hong Hong HSI up 1.15%. China Shanghai SSE rose 0.92% to 2806.81, closed above 2800 psychological level. In particular, SSE's strong close above medium term channel resistance and 55 day EMA should have confirmed defending of 2638.30 key support (2016 low). Further rebound is now in favor in near term. Elsewhere, Gold is back at 1195 but it's holding above 1187.58 near term support. Thus, another rise remains mildly in favor in near term through 1214.30.

Technically, in spite of the rebound attempt, no technical level is broken by the Dollar. EUR/USD is holding above 1.1723 minor support, GBP/USD above 1.3042, AUD/USD above 0.7228. USD/CAD is also held below 1.2975. More is needed for dollar to confirm its underlying bullish momentum. These mentioned levels will be watched closely for the rest of the session.

FOMC preview: Rate hike for sure, focus on new projections

Fed is widely expected to lift federal funds rate by 25bps to 2.00-2.25% today, without a doubt. The voting will be a point to note to seen how impatient the doves were. But it's more likely to be unanimous than not at this stage. Also, there are expectations of a slight change in the language. That is, "the stance of monetary policy remains accommodative" could be changed to "somewhat accommodative" or even dropped. But this won't trigger much market reactions, changed or not.

The major focuses will be on the new economic projections. Firstly, 2021 figures will be released. Based on June's projections, medium projected appropriate federal funds rate will be at 3.4% by the end of 2020. We'd be eager to know if Fed policy makers expect to stop there through 2021, or they would lean towards more tightening ahead. (Btw, at 3.4% which is above 2.9% projected longer run rate, that's tightening. Now, it's just accommodation removal, totally different stage.)

Secondly, while all the figures, inflation, growth, unemployment, policy path matter, we believe the key is on the 2.9% estimated longer run rate. From the communications of Fed officials, the general consensus is for Fed to raise interest rate to "neutral" and see how it goes from there. A raise in the estimated longer run rate will be tied to a perceived higher neutral rate. And that would be, Fed's rate hike cycle would likely be prolonged further. To us, this is the single most important figure that moves markets.

Here are some suggested readings on FOMC:

• Trump Makes Mark At UN, But Prepare For FOMC Outcome
• What To Look For In Markets Ahead Of Dot Plot
• Fed Preview: Near-Term Path Set in Stone, All Eyes on 2019 and Beyond
• Fed 'Certain' to Raise Rates, Optimistic Commentary Likely on Tap
• Greenback's Path Hinges On The Fed's Dot Plot
• FOMC Preview: Destination Neutral

ECB Praet: Market curve on interest rate fully coherent with ECB objective

ECB Chief Economist Peter Praet talked again today. He said in a Reuters television interview that on growth, "risks are mounting". Though, he also noted "so far we haven't seen any impact on real data… I'm not excessively worried." He also reiterated the central bank's base scenario, "where inflation is going to converge towards 2 percent, is conditional on very easy financial conditions in general."

Financial markets are seeing ECB's first rate hike in around next October. Praet gave a nod and said "the market curve that we see today, the interest rate curve, is fully coherent with the objective we have." He added, "you're going to have low rates for some period of time."

Praet also dismissed the rhetorics of Italian government officials and politicians on fiscal spending. He said "in Italy, we have a very big contrast between the communication, words, and the deeds." And, "The key information will be on the budget, so we have to see those figures. The pension reform is quite an important element in the picture."

China announces tariff reductions and measures to promote foreign investment and trade

China's State Council announced measures to promote foreign investment projects, lower tariffs on some commodities and speed up customs clearance processes. It should be noted that while lowering of tariffs catches most headlines, there are other measures that would be welcomed by foreign companies doing business in and with China. It's clearly a gesture for its trade and economic partners like the EU that China is speeding reform and opening up the markets further. At the same time, China is maintaining its firms stance in against Trump's bullying in trade war.

On promoting "predictable and attractive" environment for foreign investments, China pledged to deepen the reform of "distribution management" and treat foreign and domestic capital equally. Secondly, China will encourage foreign re-investments by expanding the coverage of withholding tax exemptions. Thirdly, China pledged to protect vigorously protect intellectual property rights and further standardize government supervision and enforcement.

Starting November 1, China will lower tariffs of 1585 product lines, including machinery, paper, textiles and construction materials. The reduction should reduce tax burden on enterprises and consumers by nearly CNY 60B. And, total tariff level of China will be reduced from 9.8% in 2017 to 7.5%.

Average rate for electromechanical equipment will be lowered from 12.2% to 8.8%. Average tax rate for textiles, building materials will be cut from 11.5% to 8.4%. Average tax rate for some resource products and primary processed products such as paper products will but reduced from 6.6% to 5.4%.

Also, starting November 1, customs clearance process will be simplified. Number of regulatory documents required for verification will be nearly halved from 86 to 48. Non-compliances charges will be standardized and announced before the end of October.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1734; (P) 1.1763; (R1) 1.1796; More.....

EUR/USD dips notably in early US session but it's staying in tight range of 1.1723/1814. Intraday bias stays neutral at this point. On the downside, break of 1.1723 minor support will suggest rejection by 38.2% retracement of 1.2555 to 1.1300 at 1.1779. In such case, intraday bias will be turned back to the downside for 1.1525 support. However, sustained break of 1.1779 will pave the way to 100% projection of 1.1300 to 1.1733 from 1.1525 at 1.1958.

In the bigger picture, a medium term bottom should be in place at 1.1300, on bullish convergence condition in daily MACD and some consolidations would be seen. But still, note that EUR/USD was rejected by 38.2% retracement of 1.6039 (2008 high) to 1.0339 (2017 low) at 1.2516. That carries some long term bearish implications. Thus, we'd expect fall from 1.2555 high to resume after consolidation completes. Below 1.1300 should send EUR/USD through 61.8% retracement of 1.0339 to 1.2555 at 1.1186. And, in that case, EUR/USD would head to retest 1.0339 (2017 low).

Economic Indicators Update

China's State Council announced measures to promote foreign investment projects, lower tariffs on some commodities and speed up customs clearance processes. It should be noted that while lowering of tariffs catches most headlines, there are other measures that would be welcomed by foreign companies doing business in and with China. It's clearly a gesture for its trade and economic partners like the EU that China is speeding reform and opening up the markets further. At the same time, China is maintaining its firms stance in against Trump's bullying in trade war.

On promoting "predictable and attractive" environment for foreign investments, China pledged to deepen the reform of "distribution management" and treat foreign and domestic capital equally. Secondly, China will encourage foreign re-investments by expanding the coverage of withholding tax exemptions. Thirdly, China pledged to protect vigorously protect intellectual property rights and further standardize government supervision and enforcement.

Starting November 1, China will lower tariffs of 1585 product lines, including machinery, paper, textiles and construction materials. The reduction should reduce tax burden on enterprises and consumers by nearly CNY 60B. And, total tariff level of China will be reduced from 9.8% in 2017 to 7.5%.

Average rate for electromechanical equipment will be lowered from 12.2% to 8.8%. Average tax rate for textiles, building materials will be cut from 11.5% to 8.4%. Average tax rate for some resource products and primary processed products such as paper products will but reduced from 6.6% to 5.4%.

Also, starting November 1, customs clearance process will be simplified. Number of regulatory documents required for verification will be nearly halved from 86 to 48. Non-compliances charges will be standardized and announced before the end of October.

Full State Council release (in simplified Chinese).

China Shanghai SSE rose 0.92% to 2806.81, closed above 2800 psychological level. The main trigger was news that MSCI is considering to significantly increase weighting of A shares in its indexes.

The firm break of 55 day EMA and medium term channel resistance indicates medium term bottoming at 2644.29. That is, SSE should have successfully defended 2638.30 key support (2016 low). Further rebound is now in favor in near term. Nonetheless, we're still seeing no reason for a break through 3000 handle, which is close to 38.2% retracement of 3587.03 to 2644.29 at 3004.41.

Entering into US session, Dollar and, to a lesser extent, Yen are lifted. The are trying to overtake Aussie and Kiwi as the best performers. On the other hand, Swiss Franc is trading as the weakest one for today and suffers fresh selling just now. Still Dollar's fate will largely depend on new Fed projections. More on FOMC here.

In other markets, major European indices are mixed. FTSE is up 0.06% at the time of writing. DAX is down -0.20% and CAC is up 0.31%. German 10 year bund yield drops a little by -0.0114 for now, but is solid at 0.535, well above 0.5 handle. Earlier today, Nikkei closed up 0.39%, Singapore Strait Times up 0.09%, Hong Hong HSI up 1.15%. China Shanghai SSE rose 0.92% to 2806.81, closed above 2800 psychological level.

The Canadian dollar is trading sideways in the Wednesday session. Currently, USD/CAD is trading at 1.2957, up 0.04% on the day. On the release front, there are no Canadian events. In the U.S, the focus is on the Federal Reserve, which is virtually certain to raise the benchmark rate to a range between 2.00% and 2.25%. On Thursday, the U.S will publish Final GDP and durable goods orders.

On Friday, CPI dipped from 3.0% to 2.8% in August, posting a rare decline. Still, inflation remains well above the BoC target of 2.0%. The markets are leaning heavily towards a rate hike in October, which would raise the benchmark rate to 1.75%. BoC Governor Stephen Poloz will deliver a speech and hold a press conference, and investors will be looking for hints regarding monetary policy. With the U.S poised to raise rates on Wednesday and another rate hike likely in December, the BoC will be under pressure to follow the Fed’s lead and raise rates at least one more time this year.

All eyes are on the Federal Reserve, which is widely expected to raise rates by 25 basis points at the conclusion of its policy meeting on Wednesday. What will be the tone of the rate statement? The U.S economy is in excellent shape, with GDP for Q2 expected at 4.2%, and unemployment hovering below 4 percent. However, the escalating global trade war has raised concerns that it could cool down global economic growth and hurt the U.S economy as well. Still, another rate hike in December is pegged at 78% according to the CME, and some experts are predicting up to four rate hikes in 2019.

Here are the latest developments in global markets:

FOREX: Major currencies were trading in narrow ranges as traders were waiting for the FOMC policymakers to conclude their two-day policy meeting later on Wednesday with another rate hike on the cards. But more importantly they are interested to learn what are the central bank’s new economic forecasts and whether the monetary committee continues to see three rate rises for next year amid escalated trade tensions and a strongly growing US economy. Dollar/yen managed to touch 113.02, posting a fresh 2 ½-month high before slipping back to 112.86 (-0.09%), while the dollar index was stable around 94.13 for the third consecutive day. In the Eurozone, the Italian Finance Minister, Giovanni Tria, said that the 2019 budget will contain a universal income for citizens as demanded by the right-wing Five-star movement ruling party and a lower retirement age. Note that the party threatened to not vote on the budget unless the two mentioned requests were included. Tria also said that the government will unveil the first draft of fiscal plans on Thursday. Meanwhile the ECB chief economist admitted that risks to growth are mounting in the block, though there is no hard data evidence yet. Euro/dollar was marginally down at 1.1766 (-0.05%). Pound/dollar declined to 1.3160 (-0.16%) before a speech by UK Prime Ministe later today. In the antipodean sphere, aussie/dollar and kiwi/dollar were marginally up at 0.7254 (+0.06%) and 0.6653 (+0.11%) respectively. Dollar/loonie was flat at 1.2953.

STOCKS: European stocks were mixed on Wednesday at 1015 GMT ahead of the widely expected Fed rate hike later today. The pan-European STOXX 600 and the blue-chip Euro STOXX 50 inched down by 0.02% and 0.13% respectively. The German DAX 30 fell by 0.16%, the French CAC 40 rose by 0.25%, while the Italian FTSE MIB was weaker by 0.09%. The British FTSE 100 edged up by 0.05%. In Asia, equities closed mixed with South Korean and Chinese indices posting strong gains. In the US futures tracking S&P 500, Nasdaq 100, and Dow Jones were in the green, pointing to a positive open.

COMMODITIES: Oil prices were on the back foot early in the European session though modestly so as fears over US sanctions on Iranian oil exports and their impact on crude supply continued to provide support to the market. Yesterday the API weekly report indicated a larger increase in US crude stocks in the week ending September 21, while the US President speaking at the UN called once again for more oil and lower prices. WTI crude and Brent were last seen at $72.12/barrel (-0.22%) and $81.63 respectively (-0.29%). In precious metals, gold hovered around $1,198/ounce (-0.21%), maintaining within its $1,189 – $1,214 one-month range.

Day Ahead: All eyes on FOMC and RBNZ interest rate decisions

Traders are expected to have a relatively busy day at the office on Wednesday as central bank events will be in the spotlight, with the Federal Reserve and the Reserve Bank of New Zealand making announcements on interest rates and publishing their economic projections.

The two-day Fed policy meeting concludes today with investors projecting the central bank to raise rates by another quarter-percentage point. However, the focus would not be on the rate announcement which is fully priced in by the markets, but on the monetary policy statement following the rate decision at 1800 GMT as well as on Fed chair Jerome Powell press conference at 1830 GMT.

Investors will be paying close attention to the central bank’s latest economic projections and will be eager to hear any updates on the path of rate increases in the coming years and any comments around the global trade dispute and outlook for growth. If the Fed Chair Jerome Powell suggests that it is time to slow down, the greenback could drive quickly lower as it would cast doubt about future rate hikes. On the other hand, if he is unambiguously hawkish the dollar would soar against all major currencies.

Earlier in the day, new home sales for August will be released out of the US. Sales are forecasted to tick higher by 0.5% compared with -1.7% in the preceding month. In oil markets, the EIA weekly report due at 1430 GMT is expected to indicate a smaller decrease in US crude oil stocks for the week ending September 21 relative to the preceding week – the decrease is estimated at 1.279 million barrels versus the previous week’s decline of 2.057mn barrels.

Next in focus would be the Reserve of Bank of New Zealand (RBNZ) rate announcement at 2100 GMT. The central bank is predicted to hold rates unchanged at 1.75% and the meeting will be accompanied by a press conference by Governor Adrian Orr, and thus the focus will be on the statement for any updates. Last week’s GDP figures have helped to relieve concerns that the economy is heading into a slump. However, despite the pickup in growth, the RBNZ remains concerned about persistently weak business confidence.

As for public appearances, ECB chief Mario Draghi will be meeting German President Steinmeier at 1200 GMT at the ECB headquarters in Frankfurt where they are expected to make short statements. Also, US President Donald Trump will be chairing a UN Security Council meeting on Iran during the annual gathering of world leaders at the United Nations. Japanese Prime Minister Shinzo Abe and U.S. President Donald Trump will hold a summit meeting as well, with trade being high ranked in the agenda.

Brexit could make headlines as well as the British Prime Minister is scheduled to speak at the Bloomberg Global Business Forum in New York about her plans to build Britain’s business profile after the country’s exit from the EU.

ECB Chief Economist Peter Praet talked again today. He said in a Reuters television interview that on growth, "risks are mounting". Though, he also noted "so far we haven't seen any impact on real data... I'm not excessively worried." He also reiterated the central bank's base scenario, "where inflation is going to converge towards 2 percent, is conditional on very easy financial conditions in general."

Financial markets are seeing ECB's first rate hike in around next October. Praet gave a nod and said "the market curve that we see today, the interest rate curve, is fully coherent with the objective we have." He added, "you're going to have low rates for some period of time."

Praet also dismissed the rhetorics of Italian government officials and politicians on fiscal spending. He said "in Italy, we have a very big contrast between the communication, words, and the deeds." And, "The key information will be on the budget, so we have to see those figures. The pension reform is quite an important element in the picture."

GBPJPY continues extending its remarkable recovery from its lowest since August 2017 of 139.88 hit in mid-August. The pair is currently trading around 900 pips above the previously mentioned nadir.

The positively-aligned Tenkan- and Kijun-sen lines are supporting the view for a bullish short-term bias.

An extension of the move up may meet resistance around last week’s four-month high of 149.70; a couple of peaks from previous months at 149.30 and 150.0 lie close to this point. Further above, the 76.4% Fibonacci retracement level of the downleg from 153.84 to 139.88 at 150.54 would be eyed.

On the downside and given a move below the 61.8% Fibonacci mark at 148.51, immediate support could occur around the Tenkan-sen at 147.98. Lower still, the focus would turn to the zone around the 50% Fibonacci level at 146.85.

The medium-term outlook has tilted to the upside, given that trading activity is now taking place above the 50- and 100-day moving average lines, as well as above the Ichimoku cloud. An additional sign attesting to this is the recording of a higher high on Friday, in contrast to the downtrend condition of lower highs and lower lows that was previously at play.

Overall, the short-term picture is bullish, while the medium-term one appears to have tilted in a positive direction.

Notes/Observations

• European Indices trade mixed in quiet trade ahead of an expected rate hike by the FOMC
• Focus on Italy as the populist coalition finalizing an agreement for next years fiscal targets which is expected to be announced tomorrow
• Asian Indices traded higher, Nikkei tops 24K first time in 8 months

Asia:

• According to a poll China unlikely to follow FED rate hike as economy slows and the trade war gets worse
• Companies in China begin to hike prices as trade war sinks in, an increasing number of companies operating in China, including such multinationals as BMW and Daimler, are raising prices
• New Zealand Sep ANZ rises to 4 Month high

Europe:

• UK Prime Min May reportedly to lay out in speech today planing to cut UK corporate tax rates to lowest in the G20
• Italy Deputy PM Di Maio: 5-Star Party will not support 2019 budget targets without its demands for 'citizens income' provision and pension reform; Wants budget deficit in the region of 2.4-2.5%
• Italy Econ Min Tria has said to target a budget deficit of 1.9-2.0% while reports the Italian Government targeting deficit of 1.8-1.9%. Confirms new deficit targets to be presented tomorrow

Americas

• FOMC expected to raises rates 25bps to 2.0% - 2.25%; the eighth rate-hike of the cycle

Economic Data:

• (UK) AUG BBA LOANS FOR HOUSE PURCHASES: 39.4K V 39.6KE
• (FR) FRANCE SEPT CONSUMER CONFIDENCE: 94 V 97E
• (AT) Austria Sept Manufacturing PMI: 55.0 v 56.4 prior
• (CH) Swiss Sept Credit Suisse Survey Expectations: -30.8 v -14.3 prior
• (NO) Norway Jul AKU Unemployment Rate: 4.0% v 3.8%e
• (FI) Finland Aug Preliminary Retail Sales Volume Y/Y: 1.1v 1.5% prior

Fixed Income Issuance:

• Norway sells NOK3B vs. NOKB indicated in Apr 2028 Bond
• Italy Debt Agency (Tesoro) sells €6.0B vs. €6.0B indicated in 12-month Bills; Avg Yield: 0.206% v 0.438% prior; Bid-to-cover: 1.64x v 1.87x prior
• Sweden sells SEK5.0B vs. SEKB indicated in 6-month Bills

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx50 +0.1% at 3,423, FTSE flat at 7,506, DAX -0.1% at 12,362, CAC-40 +0.2% at 5,489, IBEX-35 flat at 9,492, FTSE MIB -0.1% at 21,644, SMI flat at 9,020, S&P 500 Futures +0.2%]
• Market Focal Points/Key Themes: European indices open mixed with a slight positive bias, later moving negative with only French stocks slightly positive; consumer discretionary sector barely maintains positive; materials and telecom among worst performing sectors; Israel closed for holiday; automakers underperforming after BMW issues profit warning; financials in focus over press reports Unicredit considering merger with ABN Amro, BBVA, or Lloyds; attention turning to FOMC decision later in the day; earnings expected in the upcoming US session include Carmax and Bed Bath and Beyond

Equities

• Consumer discretionary: Adidas ADS.DE -0.4% (sympathy with Nike results), Boohoo.com BOO.UK +8.9% (results), BMW BMW.DE -1.3% (reportedly German dealers refusing new contracts), Mitie MTO.UK -6.1% (profit warning), Scout24 G24.DE +0.4% (new CEO)
• Financials: AA plc AA.UK -8.5% (results)
• Industrials: Bouygues EN.FR +3.0% (analyst action), Danieli & Co DAN.IT +1.8% (results), Neopost NEO.FR -1.6% (results)
• Technology: Rib Software RSTA.DE +1.1% (signs new investment contract)
• Utilities: Engie ENGI.FR +0.5% (denies reactor sale)

Speakers

• Italy Econ Min Tria: May accept 2019 deficit of 1.9-2.0% - press
• Italian Gov targeting 2019 deficit of 1.8-1.9% - press -Italian Dep PM Di Maio: Wants 2019 budget deficit at 2.4-2.5%
• (FR) France Fin Min La Maire: Euro Zone must discuss common budget this year; determined to secure fair taxation of digital giants
• (TR) Turkey President Erdogan: court not politicians will decide fate of detained American pastor on Oct 12; he not authorized to let him go
• (IT) Italy Fin Min Tria: Economic growth requires stability; Growth friendly policies can be gradually implemented
• (EU) ECB's Praet (Belgium, chief economist): Interest rate curve "fully coherent" with ECB's objective; rising growth risks yet to impact hard data
• (IR) Iran Oil Min Zanganeh: US can't cut Iran oil sales without pushing up the price - Iranian press

Currencies

• EUR/USD, GBP/USD, USD/YEN trade little changed ahead of today expected rate hike by the FOMC.

Fixed Income

• Bund Futures trades at 157.99 up 7 ticks on optimism for Italy. Resistance moves to 161.82 then 163. A downside break of 158.25 sees 157.69 initially.
• Gilt futures trades at 120.71 up 29 ticks following the move in Treasuries. Continued support at 120.50, with a continued move higher targeting 123.93 then 124.00.
• Wednesday's liquidity report showed Tuesday's excess liquidity rose from €1.861T to €1.850T. Use of the marginal lending facility stayed fell from €563M to €8M.
• Corporate issuance saw moderate IG issuance pace encourage tight spreads

Looking Ahead

• 05:30 (ZA) South Africa Q2 Non-Farm Payrolls Q/Q:-0.3%e v +0.6% prior; Y/Y: 0.6%e v 0.8% prior
• 06:00 (UK) Sept CBI Retailing Reported Sales: 19e v 29 prior
• 07:00 (US) MBA Mortgage Applications w/e Sept 21st: No est v % prior
• 07:00 (CZ) Czech Central Bank (CNB) Interest Rate Decision: Expected to raise 2-week Repurchase Rate by 25bps to 1.50%
• 08:05 (UK) Baltic Dry Bulk Index
• 09:00 (MX) Mexico Aug Unemployment Rate: 3.5%e v 3.5% prior
• 09:30 (BR) Brazil Aug Total Outstanding Loans (BRL) No est v 3.13T prior; M/M: No est v -0.2% prior
• 10:00 (US) Aug New Home Sales: 630Ke v 627K prior
• 10:30 (US) Weekly DOE Crude Oil Inventories
• 14:00 (US) FOMC Rate Decision: Expected to raise target range by 25bps to 2.00-2.25%
• 15:00 (AR) Argentina July Economic Activity Index (Monthly GDP) M/M: No est v -1.3% prior; Y/Y: +3.9%e v -6.7% prior
• 15:00 (AR) Argentina Aug Trade Balance: -$0.1Be v -$0.8B prior

Wednesday September 26: Five things the markets are talking about

Global stocks are trading mixed ahead of today's FOMC rate decision, with Asian shares closing out higher, while Euro bourses are a tad down as Italy's budget talks continue to be a source of concern.

The Italian government has until tomorrow to outline its fiscal and economic projections ahead of a budget law discussion due to take place in October. Currently, the markets remains concerned that the government will try to pass a budget that is out of step with E.U rules.

This afternoon, the Fed is expected to raise interest rates by +25 bps to a corridor of +2% to +2.25% as it continues to roll back easy-money policies.

Market attention will focus on the forward guidance, including the new ‘dot plot' diagram, to gain insight into the plans for 2019 and beyond.

Currently, the U.S dollar trades steady while U.S Treasury yields trade atop of their the seven-year highs reached in May.

Note: Today's Fed decision (02:00 pm EDT) will be followed by a press conference with Chair Jerome Powell (02:30 pm EDT).

1. Stocks trade mixed ahead of Fed

In Japan, gains overnight lifted the Nikkei to an 8-months high as the index was able to overcome the impact from a number of companies' stock prices being adjusted lower amid looming dividend payments. The index rallied +0.4%. Again helping was the U.S dollar briefly hitting a two-month high and breaching ¥113.

Down-under, the S&P/ASX 200 was able to squeeze out a slight gain and ended up +0.1% at the close. Energy stocks rose a further +0.9% as oil prices rallied, while materials gained +0.8%. But financials fell -0.6% as the initial report on an alleged industry misconduct looms and health care dropped a fresh -0.7%.

Note: South Korea's markets were closed for a holiday.

In China, stocks rallied overnight on hopes that global index provider MSCI would consider quadrupling the weighting of Chinese big-caps in its global benchmarks. At the close, the Shanghai Composite index was up +1%, while the blue-chip CSI300 index was up +1.1%.

In Hong Kong, shares followed the region higher on receding trade war fears and high oil prices. The Hang Seng index rose +1.2%, while the China Enterprises Index gained +1.5%.

In Europe, regional bourses remain somewhat muted ahead of the Fed's rate announcement.

U.S stocks are set to open in the ‘black' (+0.2%)

Indices: Stoxx50 +0.1% at 3,423, FTSE flat at 7,506, DAX -0.1% at 12,362, CAC-40 +0.2% at 5,489, IBEX-35 flat at 9,492, FTSE MIB -0.1% at 21,644, SMI flat at 9,020, S&P 500 Futures +0.2%

2. Brent trades near four-year high, but U.S crude retreats

While global trade tensions remain a source of investor concern, rising oil prices are taking on a greater importance.

Despite President Trump calling for increased crude output from OPEC, crude prices have been lifted by the pending U.S sanctions on Iran in November.

Producers fear pumping more oil to compensate for lower output from Iran and Venezuela could mark a return of oversupply.

Brent crude is up +10c, or +0.1%, at +$81.87 a barrel, after gaining nearly +1% yesterday. Brent rose on Tuesday to its highest since November 2014 at +$82.55 per barrel.

U.S crude futures (WTI) are down -4c at +$72.24 a barrel. They climbed +0.3% yesterday to close at their highest level since July 11.

U.S data yesterday showed that domestic crude stockpiles unexpectedly climbed last week. API data showed that inventories rose by +2.9M barrels in the week to Sept. 21 to +400M, compared with market expectations for a decrease of -1.3M barrels.

Expect dealers to take their cue from today's official figures on stockpiles and refinery runs from the U.S Department of Energy's Information Administration (EIA 10:30 am EDT).

Ahead of the U.S open, gold prices are steady ahead of the Fed's rate decision. Spot gold is little changed at +$1,200.43 per ounce. It's been a narrow +$4 range overnight, and even tested key resistance at +$1,200. U.S. gold futures are flat at $1,204.70 an ounce.

3. Italian yields fall on budget talks

Italian bond yields continue to trade under pressure in the run-up to the presentation of Italy's budget draft, scheduled for tomorrow. A budget deficit below +2% gap (to GDP) is expected to give further support to Italian BTP's.

This morning, Italian government bond yields have dropped across the curve. Short-dated Italian yields have fallen -10 bps to +0.77%, while Italy's five- and 10-year BTP yields have dropped -5-7 bps.

Elsewhere, German Bund yields remain just below highs reached yesterday. Germany's 10-year Bund has opened at around +0.54%, down around -1 bps.

Stateside, the yield on 10-year Treasuries has fallen -1 bps to +3.09%, the largest drop in two-weeks, while in the U.K, the 10-year Gilt yield has also fallen -1 bps to +1.62%.

4. Dollar needs guidance

The ‘big' dollar is little changed ahead of today's Fed's rate decision and has meant little doing for currencies in general (€1.1765, £1.3160 and ¥112.90).

While the Fed's monetary policy tightening is likely to end next year, investors are trying to figure out if most of the dollar's strength is behind us.

Later today, the Fed could remove the word “accommodative” from its statement, but consensus thinks this is most unlikely. Even if it does, the U.S dollar may still find it difficult to find support due to its trade and protectionist policies.

Down-under, the Kiwi (NZ$0.6655) bounced higher on an uptick in business confidence.

5. New Zealand business sentiment rallies

Data overnight showed that New Zealand business sentiment lifted this month from a decade low even as firms remained pessimistic overall.

An ANZ Bank survey showed a net +38.3% of respondents expected the Kiwi economy to deteriorate over the year ahead – a previous poll showed +50.3%, which was its lowest reading since 2008.

Last month, the Reserve Bank of New Zealand (RBNZ) said gloomy business confidence was a major risk that could result in firms holding off on investment, dragging on growth and increasing the chances of another cut in official interest rates.

Later today (05:00 pm EDT), the RBNZ is widely expected to hold rates at a record low of +1.75% and signal that it plans to hold them there for an extended period of time.