US Stock markets reacted to the more dovish Fed overnight and pushed aside trade concerns to drive higher over the course of the day. The Nasdaq led the way closing up 1.42% with the S&P and Dow following in it’s wake, finishing up 1.09% and 0.84% respectively. The dollar however didn’t follow the stock markets and managed to regain most of it’s losses from it’s post FOMC dive, the Dxy trading around 96.30 on the Asian open having topped 96.60 during the day. The pound remains volatile as Brexit updates continue to hit the market thick and fast, it dipped to the 1.3000 level overnight and is currently trading around 1.3120 with traders closely monitoring the fluid situation. The EU has confirmed this morning that a delay has been granted to April 12. Commodities had a mixed day, but generally dropped off from yesterday’s high in line with the dollar appreciation with Gold notably dropping off of 1320 highs, now trading back under 1310.
Markets attempted to adjust to the Fed’s change of message over the course of yesterday’s trading and in the end we saw a bit of confusion with different reactions across the sessions and some break down in recent correlations. The initial reaction in equities was not the jump to the topside that many would have expected although we then did see good appreciation in the US time zone as the market shrugged off trade concerns. The dollar did initially react as would normally be expected with a significant depreciation but has since traded back up to levels we saw before the FOMC. It certainly feels like markets will need a few more days and sessions to interpret the recent change in Fed positioning and to absorb the further developments with regard to trade and geo-political factors, investors will be hoping for more smooth trading conditions in the weeks ahead but at the moment, it doesn’t look like they are going to get them.
Looking ahead to todays trading and it’s a quiet day in terms of fundamental data releases in the Asian session, although traders will be expecting a bit more liquidity and possibly more volatility after the Japanese return from a day off. There is a raft of Flash PMI data out in Europe tonight, but expect the rollercoaster that is Brexit to continue to dominate market focus and flow. On the US open the markets attention will stray north of the border as Canada releases it’s latest CPI numbers but then expect the focus to come back squarely on US markets with the Fed and trade issues still top of the agenda.