Market News & Analysis

FED rate hold boosts USD, hurts stocks and gold

May 2, 2019 | Market Update

High-impact economic news:

21:00 BOE Inflation Report – MPC Official Bank Rate Votes – Monetary Policy Summary – Official Bank Rate. 21:30 BOE Gov Carney Speaks.

Overnight the Federal Reserve held rates at 2.50%, Fed chair Powell dashed rate cut hopes after commenting that recently low inflationary pressures may only be “transitory,” dashing speculation the central bank was at least entertaining the idea of a rate cut because of tame inflation.

His comments boosted Treasury yields, the 2-year moved from 2.2% to trade back at 2.27%. Comments from the FED dragged stocks lower after starting the session in the positive. “The market was pricing in this rate cut. They want a rate cut and this was basically Powell saying, ‘sorry but we’re not,’” said Peter Boockvar, chief investment officer at the Bleakley Advisory Group.

Earnings and positive developments in the ongoing China-U.S trade deal got stocks off to a strong start, CNBC cited, a U.S.-China trade deal could be announced by next Friday. Strong earnings from Apple’s quarterly results and strong jobs data for April boosted indexes before the FED. Apple shares rose 4.9%. So far, the corporate earnings season is turning out better than analysts had expected. Of the companies that have reported so far, 75% have beaten earnings estimates, according to FactSet.

The other big winner out of the FED was the USD, it climbed to EUR and AUD but closed lower to the Yen. The GBPUSD refused to take notice continuing to move higher adding 18 pips. Gold dipped back below 1280 after the Federal Reserve reduced expectations of a rate cut this year boosting the USD, and signalled strong economic growth.

In today’s Asian session a lot of key markets remain closed for holiday’s. The ASX200 is trading 31 pts lower as the energy and financials see the heaviest selling.

Tonight the Central Bank theme continues as traders look to the Bank of England, the official bank rate is expected to be held at 0.75% 

The NDX100 was stopped just short of making new records. 

Good trading from EightCap

Sources – CNBC

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