FOMC Decision and Iran De-Escalation Commentary Set to Drive Markets

The highly anticipated FOMC decision is set to be announced today, with market expectations pointing towards a rate hike. However, the real focus lies in the guidance provided by the Fed, as it will determine whether the hike is hawkish or dovish.

A hawkish hike would signal that the job is being done and cap yields, while a dovish one would steepen the curve due to inflation credibility doubts. The 10-year yield, currently at historically elevated levels, will be closely watched for any changes in the long end of the curve.

The Iran de-escalation commentary has also been a key factor in oil prices, with crude tendings to give back ground on diplomatic language well before flows normalize. The conflicting military rhetoric alongside the foreign minister's remarks is the usual pattern, leading to a premium unwind in fits rather than a straight line.

The UK inflation data was released yesterday, showing a flat core and services rate. This is consistent with the established MPC reaction function, where steady internals have typically mattered more than the headline overshoot into a meeting expected to hold.