There is substantial risk of volatility from the Federal Reserve rate meeting later on today (Wednesday) at 19.00 BST.
Traders have placed a 91 percent chance of the central bank pulling the trigger on a second rate increase this year.
Analysts in recent weeks have become increasingly doubtful the Fed will indeed go ahead with a third rate increase later this year, as inflation, consumption and other economic data have indicated the weakness seen in the first quarter has continued.
"The Fed said today that it would decrease reinvestment of maturing bonds at a steadily increasing rate until after a year it is holding back $30bn a month on Government bonds and $20bn on mortgage backed securities".
While markets and the Fed are never perfectly aligned on the future path of interest rates, they were as close as they had been in a while prior to the March Fed meeting. The Standard & Poor's 500 index rose 0.5 percent, the Dow Jones industrial average climbed 0.4 percent, while the Nasdaq composite rose 0.7 percent on Tuesday (13/06). Unemployment dipped to 4.3 percent in May, a 16-year low.
Fed officials have concluded that the economy, now entering its ninth year of expansion, no longer needs the ultra-low borrowing rates they supplied beginning in the Great Recession.
The Fed also noted inflation is "running somewhat below 2 percent" and "longer-term inflation expectations are little changed, on balance". Sydney's S&P ASX 200 rose 1.1 percent to 5,833.90 and India's Sensex added 0.2 percent to 31,178.84. It now expects real GDP to rise 2.1% to 2.2% in 2017, compared to its previous outlook of 2.0% to 2.2%. These rates are well below the Trump administration growth goals of 3 percent a year. The Fed foresees one additional rate hike this year but gave no hint of when that might occur. That change, and the reduction in the 2017 inflation forecast, could reduce the urgency policymakers feel to hike rates again in coming months, especially if inflation remains soft. Some Fed watchers expect another increase in September.
Quincy Krosby, chief market strategist at Prudential Financial, said the Fed "appears intent on normalizing rates, as well as winding down its balance sheet, as Chair Yellen's tenure expires". Fed officials reiterated their belief that that both inflation and economic growth will pick up. In BMO's hawkish Fed decision, yields on two-, three- and five-year notes rise by about 9 basis points.
BREXIT: The European Union moved to tighten its oversight of a key financial market based in London, threatening tens of thousands of jobs in Britain once the country exits the bloc.
But industrial robot maker Fanuc rose 0.65 percent to 21,565 yen and Sony gained 0.56 percent to 4,060 yen, tracking rallies in United States technology firms.
With the Federal Reserve interest rate decision only hours away, the US Dollar firmed broadly.