• The euro on Tuesday held on to gains made the previous day, when it rose on revived bets for the European Central Bank to wind down its bond-buying stimulus this year and to raise interest rates around the middle of 2019.
The euro, which advanced 0.4 percent on Monday, held steady on the day at $1.2336.
The common currency had drawn strength on Monday from a source-based Reuters report that ECB policymakers are shifting the focus of their debates.
Policymakers are comfortable with market forecasts, including for a rate hike by mid-2019, and the debate is increasingly about the steepness of the rate path thereafter, as some want future expectations contained, given the slow rebound in inflation, five sources with direct knowledge of the discussion told Reuters.
Sterling also stood tall after setting a one-month high against the dollar on Monday, as Britain and the European Union agreed to a 21-month post-Brexit transition period and a potential solution to avoid a “hard border” for Northern Ireland.
Sterling held steady at $1.4024. On Monday, the pound rose as high as $1.4088, its strongest level since Feb. 16.
The strength in euro and sterling helped weigh on the dollar, which last stood at 89.951 against a basket of six major currencies, down from Monday’s intraday high around 90.345.
• The Federal Reserve Open Market Committee (FOMC) voted to raise the target range for the federal funds rate by 25 basis points to 0.75 to 1 percent. The vote was near unanimous, with Minneapolis Fed President Neel Kashkari casting the only dissenting vote, wanting to hold rates steady.
The projected policy path for the federal funds rate was in line with December’s, with the Fed’s dot plot showing three rate hikes this year. Participants estimated a target rate of 1.4 percent for 2017, a 2.1 percent rate for 2018, and a 3.0 percent rate for 2019.
In their decision to move the target rate, the Committee noted that the labor market has “continued to strengthen and that economic activity has continued to expand at a moderate pace.” Monetary policy remains accommodative, supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation.
• Markets expect a rate hike from the Federal Reserve when its policymaking committee meets this week. Anything beyond that could cause a market tantrum, says one market watcher.
There are two market-moving events to watch for at this week's meeting, says Stacey Gilbert, market strategist at Susquehanna Capital Group. The first is any rate hike and the second is forward projections.
"The market is not pricing in really outlier types of scenarios here," Gilbert told CNBC's "Trading Nation" on Friday. "Call it a 25 basis point, no significant changes, the broader S&P market might be up 20 to 40 basis points."
The chances of a 25-basis-point hike from the Federal Open Market Committee at the March meeting sit at 94 percent, according to CME Group fed funds futures. A rate increase of that size would put the federal funds rate at 1.5 percent to 1.75 percent. Markets are pricing in a zero chance of a hike any larger than 25 basis points.
"If we get an outlier event like a 50-basis-point rate hike, seeing the S&P 500 down 3 percent is certainly not the craziest statement I'm ever going to make," said Gilbert.
• The United States and South Korea will resume joint military drills next month, Seoul and Washington said on Tuesday, exercises that will go ahead despite U.S. President Donald Trump’s planned meeting with North Korean leader Kim Jong Un.
Seoul and Washington said in January they would delay the annual exercises until after the Winter Olympics and Paralympics held in South Korea last month, helping to create conditions for a resumption of talks between South and North Korea.
• Former Japanese tax agency chief Nobuhisa Sagawa, a key figure in a cronyism scandal that has sparked a political crisis for Prime Minister Shinzo Abe, will be summoned to testify in parliament on March 27, a ruling party source told Reuters.
• Oil prices rose by almost 1 percent on Tuesday, lifted by a weak dollar, tensions in the Middle East and concerns of a further fall in Venezuelan output.
U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $62.59 a barrel at 0656 GMT, up 53 cents, or 0.9 percent, from their previous close.
Brent crude futures LCOc1 were at $66.56 per barrel, up 51 cents, or 0.8 percent.
Reference: Reuters, CNBC, Bankingjournal.aba
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