As expected, global financial markets were quiet for the majority of yesterday’s trading as a plethora of centres enjoyed a day off. The main event came at the end of a long trading day with the Fed’s latest rate announcement and statement. As expected they left rates on hold, however they did drop the IOER by 5 bps and Jerome Powell confirmed the FOMC’s current patient approach and advised that the next move could be either up or down with regard to rates. The market was positioned for a more dovish outlook and consequently we saw the dollar and US treasury yields appreciate and stock markets drop. The moves weren’t huge across the market but investors will now be looking at US data even more closely in the coming months and if the numbers start to firm, expect more unwinding of positions placed across assets on the back of anticipated Fed rate cuts.
The major indices in the US closed the day well in the red with the S&P leading the way, down 0.75%, the Dow and Nasdaq not far behind finishing down 0.61% and 0.57% respectively. The dollar had been dropping steadily over the last week since the Dxy hit multi year highs above 98.30 however if jumped from lows on the day near 97.20 to trade back up around 97.65 after the Fed statement. Oil had another whippy day in thin conditions, with WTI falling below $63/b after news of increased US stockpiles and production before bouncing back to close the session around $63.5/b, Brent closed just above $72/b. Gold also had a volatile day, dropping from a high near 1288 pre Fed to a low at 1273.50 after the meeting.
The majority of the worlds markets are back in business today and expect the fallout from the Fed to continue to exert influence on flows as the day progress and conditions return to normal. The calendar is light again during the Asian time zone but risk events start to pick over the rest of the trading sessions through to the US job numbers at the end of the week. The European day kicks off with a raft of Manufacturing PMI numbers out on the continent, however the main focus will be the latest from the Bank of England later in the session. In the US, earnings season rolls on and expect more market positioning post the Fed and ahead of tomorrow’s Non-Farm Payrolls.