The Fed came out with a much more cautious statement than the market was expecting this morning and indicated that they will not be raising rates in 2019. The dollar took a significant hit with the Dxy pushed below 96.00 for the first time this month and yield on US treasuries dropped further with the 10yr now at 2.52%. Equity markets initially rallied on the news but US indices finished the day on the back foot as trade concerns increased after President Trump earlier confirmed that tariffs will remain in place until a deal is signed. The pound was the only major to close the day lower against the greenback as Brexit concerns increased with the EU advising that an extension of the Brexit deadline will be permitted if a deal is agreed with parliament before March 29. Commodities moved higher again with WTI topping $60/b for the first time since November and Gold jumping to 1315.
Investors will be digesting the latest update from the FOMC during the course of today’s trading and will be noting that it’s only taken a few months for the central bank to completely change tack in the face of increasingly uncertain market conditions. Equity markets have been buoyed in the first couple of months of 2019 by the change of stance from the Fed and last night’s reaction in the indices is another example of where sentiment has superseded fundamentals. Some investors may now be questioning how far the recent market rally can go in the face of global growth headwinds.
Looking ahead at today’s trading sessions and the main focus for the Asian session will be Australia’s latest employment data, the Aussie rallied well against the dollar overnight but recent data has been weak and traders will be watching this number closely to see if more momentum will come to the move. It’s a big night in Europe tonight with two major central bank rate announcements, first up the SNB are due to update the market with a ‘no change’ firmly priced in, but well and truly under the microscope is the Bank Of England who once again have their hands tied in the face of Brexit uncertainty, UK Retail Sales numbers also due for release ahead of the MPC. It’s quiet in terms of data releases in the US session tonight but expect the fall out from the Fed meeting to continue to exert pressure as the day progresses.