The dollar gained ground across the board after the Fed delivered a statement largely in line with market expectations that they are still on a tightening path and last months market volatility did little to alter their course. Market expectation of a December rate hike is virtually locked in now, with the Fed reiterating that it sees ‘further gradual increases’ coming after describing economic activity and jobs data as ‘strong’. The equity markets dropped off after the announcement and US 10 year yields remained steady at recent levels. Oil continued on it’s recent downward trajectory with WTI now trading under $61/b and Brent under $71/b.
This Fed meeting may be the catalyst the slows up the feel good factor that the markets have enjoyed over the last few sessions post the US midterm election results. We’d seen a positive ‘risk on’ trading environment after the midterms past largely in line with expectations, but with the Fed confirming that they are sticking with their well defined path we may see some of the investor concern returning to markets and some further downside for the stock indices over the next few sessions. The US-China trade situation will also remain front of mind for most market participants and the next comments from President Trump on that issue could cause further volatility in the market.
Looking ahead to today’s trading and expect the Asian stock markets to start on the back foot after the markets reaction to the Fed meeting. The focus will move to Australia mid-morning with the release of the latest RBA Monetary Policy Statement, although little new is expected from it by most Aussie traders. The UK will once gain come under the microscope as we enter the London day with the latest UK GDP and Manufacturing Production data due out early in the session before the release of the US PPI numbers later in the day.