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* Fed still leans in the direction of policy easing, but timing will be delayed

* Stocks flat after erasing gains on Fed signalling no hurry to cut rates

* Brent crude falls 1% after Trump says Iran wants to negotiate  

* Bank of England expected to pause amid softening economic data

* US markets will be closed on Thursday for the Juneteenth holiday.

FX: USD dipped marginally through the day before gaining a very mild bid after the FOMC meeting and press conference.  Growth projections were revised down while inflation ones moved higher. The median dot for 2025 was unchanged with two 25bps cuts, but only one cut each was seen in 2026 and 2027. This was seen as mildly hawkish but ultimately, future events are deeply uncertain and so to the dots. We will watch for Trump’s reaction to the Fed’s still cautious tone on rate cuts. Regarding geopolitics, it seemed like a waiting game around whether the US and Donald Trump would get involved in the Israel-Iran conflict. Brent crude consolidated just below recent highs just below $77.

EUR settled below 1.15 in a relatively quiet day for the world’s most traded currency pair. We’ve had a recent run of encouraging EZ data while ECB speakers have reiterated the bank’s meeting by meeting stance. The recent top is 1.1631 with the dollar essentially driving the pair in recent sessions. The 50 -day SMA at 1.1347 remains an important level of medium-term support.

GBP was mid-pack among the majors after the sharp sell-off on Tuesday. Yesterday’s latest inflation data added to the BoE doves’ arguments for policy easing. The services figure printed just below estimates at 4.7%. This comes on the back of softer wages and growth numbers. Focus turns to today’s BoE meeting with the next rate cut not seen until September. See below for more.

USD/JPY fell after three straight days of buying which was last seen in late May though losses were pared after the Fed meeting. Japan trade figures were better than expected with a smaller deficit in May. Japan CPI is released on Friday. Near-term resistance sits just above 145 and then 146.28, with the 50-day SMA at 143.97 and next support around 142.50.

AUD continues to oscillate with choppy price action all through this month. Of course, the aussie is a high-beta currency which tracks risk sentiment. We get labour market data today, plus NZ Q1 GDP. CAD built on its bullish rebound from Tuesday having dipped to fresh cycle lows at 1.3538 on Monday. Minutes from the recent BoC meeting highlighted concern over persistent core inflation.

US stocks: The S&P 500 lost 0.03% to settle at 5,981. The Nasdaq closed unchanged at 21,720. The Dow Jones finished lower at 42,172, losing 0.10%. Energy was the top loser this time with only three sectors in the green. Tech led the gainers, up 0.36% with utilities up +0.25% and real estate +0.14%. US markets will be closed on Thursday for the Juneteenth holiday. The S&P 500 is down for two days in a row, albeit very modestly.

Asian stocks: Futures are mixed. Asian markets were mostly lower as markets continued to navigate the rising Middle East tumult, and ahead of the FOMC meeting. The ASX 200 traded muted with gold miners lagging. The Nikkei 225 moved to fresh highs helped by yen weakness. PM Ishiba agreed to carry on with ministerial-level trade talks. The Hang Seng and Shanghai Comp traded lower again with EV makers in Hong Kong acting as a drag.

Gold has been relatively quiet over the past few days with another consecutive narrow range trading day on Wednesday. Bullish momentum picked up earlier in the month but has tailed off recently with much uncertainty and profit taking around the Middle East tensions.

Day Ahead – Australia jobs, BoE meeting

Consensus expects 20k jobs to be added in the Australia employment data, less than the prior 89k. Three out of four months so far this year have been strong with net job gains of over 114k. But there are signs that labour market growth might be slowing with an important business survey seeing the employment metric hitting a new cycle low. The jobless rate is forecast to stay unchanged at 4.1%.   

The BoE is set to sit on its hands and keep the base rate at 4.25%. Data since the last meeting has been softer than expected, with yesterday’s crucially important services inflation and last week’s wage growth both showing signs of cooling and the labour market loosening. But guidance is likely to stay with the “gradual and careful approach to removing monetary policy restraint”. The hawks will likely need more evidence that the economy is returning to a more sustainable footing. The vote split is expected to be 7-2, with the chance of a 6-3.

Chart of the Day – GBP/USD falls out of its bull channel

Key for markets and GBP during the BoE meeting will be if Governor Bailey and the MPC hint at a quicker pace of rate cuts than the current quarterly pace. Money markets currently price in a year-end rate of 3.75% so that means two more quarter point cuts are expected this year.

Sterling has struggled this month versus its peers, except the greenback, as UK domestic economic data has begun to roll over. The big surprise would be a hawkish MPC message which could underpin some support for the pound in the near term. But cable has just moved below the bottom of the bull channel seen this year. The recent multi-year top is 1.3631, while initial support/resistance is the prior swing high at 1.3434 with the 50-day SMA just below at 1.3277.