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GOLD

Softer USD Lends Support

US TSYS

10s Out Of The Recent Range

CHINA RATES

Injection Helps Keep Repo Rates Subdued

JGBS

Futures Unwind Overnight Losses

AUD

Firming

KOREA RATES

Higher But Within Ranges

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At the July meeting, HSBC expects the FOMC to "begin to tackle questions about the composition of tapering and how long it might last".

  • Payroll gains around or above an average 500k monthly in H2 would be enough to satisfy "substantial further progress" taper criteria.
  • Statement: Changes to be relatively limited, could note that inflation has risen "further" since June, and perhaps also acknowledge that the sectors hardest-hit by the pandemic have shown further improvement.
  • Press conference: Powell's July congressional testimony provided a roadmap for what to expect.
  • Future action: December taper announcement. On pace: if Fed were to announce a taper with a similar pattern as in 2014 (in this case, $5B/month each of MBS and Tsys), net MBS buys would conclude at end-October 2022, but net Tsy buys would still be ongoing.
  • Re MBS vs Tsy taper, "Powell could address this issue in his press conference … and additional details could come with the minutes".