Syrian Deal Sealed

Tense negotiations between the US and Russia led to a deal to disarm Syrian chemical weapons. The deal is likely to boost risk trades and calm nerves at the Fed ahead of Tuesday's FOMC decision. The market will be free to focus on the Syrian news with a light calendar to start the week.

The Syrian civil war will continue without direct US involvement for the coming months. The deal gives Syria until mid-2014 to remove or destroy chemical weapons. At the very least, this virtually eliminates the chance of a near-term strike which is more than enough to remove the risk premium in oil. Other risk assets are also likely to respond positively.

The focus now shifts to the Fed decision on Tuesday. The market has settled around a $10 billion taper but there is considerable uncertainty about messages on forward guidance and the path of the taper.

Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.

EUR +13K vs +22K prior

JPY -95K vs -80K prior

GBP -38K vs -43K prior

AUD -60K vs -72K prior

CAD -31K vs -35K prior

CHF flat vs +1K prior

NZD flat vs flat prior

US Dollar Index longs at 21K vs 12K prior

The market was quick to flip the switch toward US dollar longs and reluctant to trim cable positions. However, later in the week there were clear signs of capitulation from the cable bears.