• FOMC held rates between 1.00%-1.25%, as expected. FOMC stated that activity is rising at a "solid rate" despite hurricanes
• USD weakened across the board after reports that Trump intends to pick Powell as the next Fed Chair
• Looking ahead, highlights include Eurozone Mfg. PMIs, UK Construction PMI, BoE Rate Decision and QIR, Fed’s Powell, Dudley and Bostic

FOMC

FOMC held rates between 1.00%-1.25%, as expected with the decision made by unanimous vote.

FOMC stated that activity is rising at a "solid rate" despite hurricanes and near-term risks roughly balanced and noted it is watching inflation closely and repeated it sees inflation stabilising at 2% over the medium term. (Newswires)

Note: There were no major developments from the FOMC which was reflected in the muted reaction seen across asset classes, although its categorisation of the US economy was upgraded to expanding at a “solid rate” (versus the previous “rising moderately”), and absent any major shockers, analysts seem content to peddle the ‘December hike remains on track’ narrative - the implied probability nudged up slightly, with markets now pricing in a 98% chance the FFR target will be lifted by 25bps by the end of the year.

ASIA

Asian equity markets were mostly subdued as region failed to sustain the early momentum from US, where stocks printed fresh intraday record levels before some profit taking crept in. Furthermore, a deterioration in sentiment coincided amid a continued pullback in US equity futures due to tax plan uncertainty, with reports now suggesting the plan could include a phase out in corporate taxes after a decade. As such, ASX 200 (-0.1%) finished negative with financials pressured after big 4 NAB announced to drop 6,000 workers. Elsewhere, Nikkei 225 (+0.3%) was indecisive but extended on 21-year highs nonetheless, while Hang Seng (-0.2%) and Shanghai Comp. (-0.7%) were lower after the PBoC skipped its liquidity operations. Finally, 10yr JGBs saw marginal gains as they tracked upside in T-notes and amid an indecisive risk tone in Japan, while the BoJ were also in the market for JPY 710bln of JGBs in the belly to super-long end.

PBoC refrained from open markets today. (Newswires)

PBoC set CNY mid-point at 6.6196 (Prev. 6.6300)

EUROPE/UK

Sir Michael Fallon resigned as defence secretary last night amid suggestions of inappropriate behaviour towards female journalists. (Newswires)

FX

USD weakened across the board after reports the White House informed status quo candidate Powell that President Trump intends to pick him as the next Fed Chair. This benefitted the greenback’s major counterparts in which GBP/USD rose 40 pips to test the 1.3300 level to the upside, while EUR/USD and NZD/USD also saw similar upside. USD woes were also exacerbated following a firmer reference rate by the PBoC, which further underpinned the gains in China-proxy AUD after the currency was initially buoyed by better than expected Trade Balance and Building Approvals data.

Australian Trade Balance (AUD)(Sep) 1745M vs. Exp. 1200M (Prev. 989M, Rev. 873M). (Newswires)

Australian Building Approvals (Sep) M/M 1.5% vs. Exp. -1.0% (Prev. 0.4%, Rev. 0.1%)

COMMODITIES

Commodity prices were relatively uneventful with WTI crude prices unchanged and unaffected by the somewhat bullish OPEC-related rhetoric. Elsewhere, gold prices were mildly supported on the back of USD weakness and copper lacked impetus alongside a mostly subdued risk tone in the region.

Saudi Energy Minister Al-Falih said he expects oil market to continue proving and producers to renew resolve to normalize stockpiles. (Newswires)

Kuwait said it sees oil output cut being announced in Vienna and that the length of extension and other alterations could be announced in Feb-Mar. (Newswires)

OPEC wants to see the floor for oil prices at USD 60/bbl in 2018, according to a source familiar with Saudi oil thinking. (Newswires)

GEOPOLITICAL

North Korea is reportedly working on an advanced version of missile that could reach US, according to reports citing a US official. (CNN)

US

The US Treasury’s Quarterly Refunding announcement saw auction sizes left unchanged; a few were expecting sizes to be raised in some tenors. The Treasury kept this possibility alive of raising the sizes at the February announcement, most likely by raising the size of 5-year issues, and 3-month bill issues; it also has floated the option of introducing a 2-month bill. In the aftermath of the Treasury’s announcement, the 5s30s spread narrowed to the flattest levels since 2007. 30s also remain supported by comments by Tsy Sec Mnuchin earlier in the week that there is little demand for an ultra-long bond. US 10-Year T-Note futures for December settled at 124-29, down by 1 tick.

US White House reportedly notified Powell that President Trump intends to nominate him for Fed Chair. (WSJ) There were also reports that US President Trump is to announce Fed Chair nominee today at 1500EDT. (Newswires)

US GOP tax bill said to propose 12% repatriation tax on cash and 5% rate on non-cash holdings. In related news, US House Republicans were reported to be mulling a corporate tax phase out after 10 years, while US House Tax Committee Chairman Brady said that a permanent corporate tax reduction could require several steps. (Newswires)