On Tuesday, the U.S. Federal Reserve began its two-day monetary policy meeting, but during the trading session financial market traders shifted their focus to the United Nations, where U.S. President Donald Trump tried to encourage members to confront threats from rogue nations like North Korea.
In a speech before the United Nations General Assembly, Trump said “North Korea’s reckless pursuit of nuclear weapons and ballistic missiles threatens the entire world with unthinkable loss of human life.”
Trump also said, “No nation on Earth has an interest in seeing this band of criminals arm itself with nuclear weapons and missiles. The United States has great strength and patience, but if it is forced to defend itself or its allies, we will have no choice but to totally destroy North Korea. Rocket man is on a suicide mission for himself and for his regime. The United States is ready willing, and able, but hopefully this will not be necessary. That’s what the United States is all about. That’s what the United Nations is for. Let’s see how they do.”
Despite the tough talk from Trump, the financial markets had no response to his speech. This is because most investors feel that a war on the Korean Peninsula seems very unlikely at this time. Investors in China, Japan and South Korea don’t believe there will be a war because they perceive a low potential reward with high risk.
The United Nations likely feels the same way this is why the U.N. Security Council is more likely to continue with strong sanctions like imposing a ban on North Korea’s textile exports and capping its crude oil imports.
U.S. Federal Reserve Monetary Policy Pronouncements
The U.S. Federal Reserve is not expected to raise rates at the September meeting. However, it may drop hints that it is still on track to raise rates at its December 12 -13 meeting. Market expectations for a December rate hike rose to 58.3 percent on Tuesday, according to the Fed Funds Indicator.
The Fed is also widely expected to announce its plan to begin unwinding its $4.5 trillion portfolio in October.
Tax Reform Plan
Stock market investors were also focused on U.S. Tax Reform. Interest on this topic grew after Senator Bob Corker told reporters that GOP lawmakers had reached a tentative tax reform-budget deal. Once again, the market’s reaction to this news was muted because investors are looking for something more concrete and nobody wanted to take a big position in the market ahead of the Fed.
This article was originally posted on FX Empire
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