US President, Donald Trump and North Korean President, Kim Jong-un’s Singaporean summit made headlines around the world yesterday and lifted risk appetite in the markets. Although the meeting was short on ink-to-paper commitments, it seems to have opened doors to more friendly and open dialogue between the countries going forward, possibly laying the path to a denuclearized Korean peninsula at some point in the future. Although Kim is unlikely to lay down his nukes anytime soon the fact that the two leaders met at all is progress and further talks, possibly in Washington, could be on the horizon before the end of the year.
The US dollar traded higher through trade overnight edging upward and enjoying modest gains against a basket of major trading counterparts. With attention directed mainly to the Kim/Trump summit investors brushed aside elusive promises of denuclearization and were reserved in extending risk appetite moves. Instead, a stable CPI inflation report and somewhat hawkish commentary from Fed Chair Jerome Powel drove optimism leading into today’s FOMC rate announcement and saw the world's base currency tick 40 points higher against the JPY and force the euro back below 1.1750.
The Federal Reserve is set to raise its benchmark interest rate today at 2 pm. The statement will be followed by Chairman Jerome Powell’s press conference which will give guidance on future interest rate hikes. The committee hinted back in March that three hikes were coming this year, market participants now think that any sign of a hawkish Fed will signal a fourth hike is in the cards.