News & Analysis

Stocks drop post Powell comments; USD fights back – USDCAD jumps after Fed and new trade worries; U.S GDP data tonight

Sep 26, 2018 | Market Updates

Upcoming high impact news:

22:30 USD Core Durable Goods Orders
22:30 USD Final GDP
23:30 EUR ECB President Draghi Speaks

U.S stocks fell on Wednesday, Fed Chair Powells comments sending bank stocks and T-notes lower. Stocks gave up earlier gains dropping post comments. The Dow Jones fell by 106.93 the S&P500 lost 9.59 and the Nasdaq dropped 17.10. Powell told reporters after the Fed announced it raised rates for the third time this year he does not see inflation surprising to the upside, noting: “It’s not in our forecasts.”

The comment sent rates lower, along with bank stocks. The 10-year Treasury note yield fell to 3.06%. Shares of J.P. Morgan Chase, Bank of America and Citigroup all dropped more than 1%. The SPDR S&P Bank ETF (KBE) dropped 2%. – CNBC Rates moved to 2.25% as widely expected by the market.

President Trump hit out at Canada this morning; His comments looked to have boosted the USDCAD, some of the Presidents comments “Trump says Canada has treated U.S. very badly in trade, he rejected one-on-one meeting with Canada’s Trudeau and “If Canada doesn’t make deal with us, we’re taxing cars” The USDCAD added 67 pips and is 19 pips higher this morning. Risk jumped late in the session to the USD but cut gains after Powell’s comments. The AUD EUR and GBP adding over 30 pips during the short-term rally. Risk closed lower to the Yen after a few attempts to move higher, the EURJPY losing 58 pips reconfirming 133.10 as a high.

The Dollars short-term drop, “The removal of the term ‘accommodative’ does signal that the neutral rate is on the radar and the FOMC will need to justify restrictive monetary policy in the coming year, a somewhat dovish development in our view,” said Marvin Loh, senior global market strategist, at BNY Mellon in Boston. Mark McCormick, head of North American FX strategy, at TD Securities in Toronto agreed, saying the absence of “accommodative” in the statement was the reason for the initial fall in the dollar.

Oil traded flat buyers testing 72.30 before settling flat for the session. Gold fell on USD strengthening, testing its range low at 1190.30 before paring some losses to close $6 lower. We’re still seeing price contained in a range between 1208.95 and 1190.

This morning, risk has started slightly higher to the USD. The majors are trading slightly higher to the Yen. The ASX200 has a negative lead do to a weaker overnight session on the SPI. The open could see a test lower. Traders will be looking to tonights U.S GDP (EXP 4.2%) with interest. Early evening late afternoon German Prelim CPI will also be released.

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Sources; CNBC – All times are AEST

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