News & Analysis
Fed raises rates – increase GDP forecast; USD Sinks – Risk and Gold surge – Oil fly’s back above $65; Spotlight shifts to Bank of England
Upcoming high impact news:
▸20:30 GBP Retail Sales
▸23:00 GBP MPC Official Bank Rate Votes – Monetary Policy Summary – Official Bank Rate
US markets – Stocks traded choppy last night finishing lower after the Fed met expectations raising rates by 25 basis points to 1.75%. The Dow Jones closed 44.96 pts lower, the S&P500 lost 5.01 points and the NASDAQ closed 19.02 pts lower.
Fed Chair Powell advised in an accompanying statement, the FOMC said that the economic outlook has strengthened in recent months, but also that inflation will be watched closely. Against this background, further gradual rate hikes are likely to be warranted. The dot plot did show tailwinds for dots, but not enough to lift the median for 2018 to four rate hikes as we had expected. The median dots show three rate hikes in 2019 and another two rate hikes in 2020, an increase in projections. Mr Powell said that the FOMC members generally tried to find the middle ground rather than being hawkish or dovish. His press conference was generally short on surprises as well as new policy guidance. Central bank officials also raised their GDP forecast. Presidents Trump’s trade policies raised a flag as bankers worry about its possible implications for future growth.
European markets – finished mixed as traders looked to the US Fed decision. The FTSE closed 22.30 lower, the DAX edged higher adding 1.82 pts and the CAC settled 12.69 points lower. Europe’s basic resources recovered from losses earlier in the day, rallying 1.7 percent by the market close. Kingfisher Europe’s second-largest home improvement retailer tanked by 10.7 percent after announcing it saw a more uncertain future.
Oil – powered back to levels not seen since early February after a shock drop in US stockpiles. Price closed at $65.40 adding 180 cents. Data released by the U.S. Energy Information Administration (EIA) on Wednesday morning showed a surprise 2.6 million barrel draw in crude inventories. Analysts had expected a 2.5 million barrel build.
Forex – last night’s main mover was the USD as it was trashed post-Fed. The USD did rally on the release but that rally was quickly shut down. The USD finished sharply lower across the board. The USDCAD, EURUSD, AUDUSD all saw strong moves. The USDJPY finished 50 pips lower despite a weaker Japanese Yen. The USDCAD lost 170 pips breaking its short-term uptrend. EURUSD is starting to complete a trend continuation pattern this morning after locking in a higher low this morning. We would like to see buyers close above 1.2360 to show buyer commitment. The Japanese Yen had a weak night to risk majors. The GBPJPY adding 84 pips. Gold surged to a weaker USD adding $19 in its strongest session for the month. Buyers could see resistance or a pause at 1337.70.
The rates spotlight moves across the Atlantic tonight, the Bank of England rates decision and Monetary Policy Summary will be released at 23:00 AEDST tonight. Rates are expected to remain on hold at 0.50%. Depending what comes out from the summary things could get very busy on the Sterling.
Good trading from Eightcap.
Sources; CNBC – Nordea. All times are AEDST
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