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Treasurys rally as Fed extends pause; pound pressured amid Brexit delay doubts


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Treasurys rally as Fed extends pause; pound pressured amid Brexit delay doubts

➤ Fed signals next rate hike may not come until 2020.

➤ BoE expected to maintain rate as Norges Bank hikes.

➤ U.K. PM May formally asks EU to delay Brexit to June 30.

➤ Top U.S., China trade negotiators to meet in Beijing next week.

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Treasury yields continued to edge lower while the dollar recouped yesterday's losses after the U.S. Federal Reserve signaled no more rate hikes for the year.

The Fed extended its dovish pivot yesterday, keeping its benchmark interest rate unchanged and signaling that the next rate hike may not come until 2020. Several analysts had penciled in one rate hike for 2019.

Policymakers also announced a plan to slow the central bank's efforts to reduce its $4 trillion balance sheet, saying its current program of cutting its assets each month will wrap up at the end of September.

Yields on 10-year Treasurys fell to around 2.54% from about 2.59% shortly after the Fed's announcement yesterday and continued to edge lower to nearly 2.51% as of 6:30 a.m. ET today. Two-year Treasury yields stood at just under 2.40%, down about 5 basis points from before the Fed's dovish decision.

The dollar index, which tracks the U.S. currency's performance against a basket of majors, recouped last night's losses and was up 0.18% to 96.10. ING analysts wrote in a note that with the Fed unlikely to hike anytime soon, the dollar "now lacks catalysts for another persistent push higher."

Meanwhile, sterling came under pressure amid uncertainty on whether Britain's exit from the European Union will be delayed from March 29, as European Council President Donald Tusk said Brussels would only grant the U.K.'s request to postpone Brexit to June 30 if British lawmakers agree on a withdrawal agreement.

The pound lost 0.47% against the dollar and 0.23% against the euro as the Brexit saga continues and ahead of the Bank of England's monetary policy decision, with analysts expecting the key rate to remain unchanged.

The euro slipped 0.15% against the dollar, which added 0.11% against the Swiss franc as the Swiss National Bank kept interest rates unchanged and lowered its inflation forecast. The dollar dropped 0.90% against the Norwegian krone as the Norges Bank hiked its policy rate, as widely expected.

Global equities, meanwhile, struggled for direction and futures pointed to a mixed opening on Wall Street this morning as markets continue to assess the Fed's dovish move.

In Asia, the Shanghai SE Composite index closed up 0.35% while Hong Kong's Hang Seng slipped 0.85% amid lingering trade uncertainties as U.S. President Donald Trump said tariffs on Chinese imports should remain in place "for a substantial period" even after a trade pact with Beijing is struck. U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are scheduled to travel to Beijing on March 28 to 29, while Chinese Vice Premier Liu He is set to head to Washington early next month.

The MSCI index of Asia-Pacific stocks excluding Japan rose 0.15%. Japanese stock markets were closed for a national holiday.

European equities traded mixed, with the Stoxx 600 index dropping 0.21% as shares in banks dropped, while miners led the gains. EssilorLuxottica SA fell about 5% after the company's top shareholder reportedly accused executives from Essilor International of violating the merger agreement with Luxottica Group SpA.

Brent crude oil dipped 0.31% to $68.29 per barrel on the ICE Futures Exchange. Gold climbed 1.23% to $1,317.70 per ounce.

More from S&P Global Market Intelligence:

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Long-term fund strategies gaining ground in private equity

US REITs raise $2.8B through ATM programs in Q4'18, up nearly 31% YOY

The day ahead:

8 a.m. ET Bank of England monetary policy decision

8:30 a.m. ET — U.S. jobless claims (Econoday consensus: 225,000)

8:30 a.m. ET — U.S. Philadelphia Fed business outlook survey (Econoday consensus: 5.5)

8:30 a.m. ET — Canada ADP employment

8:30 a.m. ET — Canada wholesale sales

10 a.m. ET — U.S. leading indicators (Econoday consensus: 0.1% month over month)

10 a.m. ET — U.S. quarterly services survey

10:30 a.m. ET — EIA natural gas report

11 a.m. ET — Eurozone consumer confidence (Econoday consensus: -7.1)

4:30 p.m. ET — U.S. Fed balance sheet

4:30 p.m. ET — U.S. money supply

7:30 p.m. ET — Japan consumer price index

8:30 p.m. ET — Japan PMI manufacturing index