- The Fed cut rates by 50 basis points to 5% yesterday and communicated a rather aggressive policy easing cycle, a move that initially pleased equity markets, but was met with a countermove and Wall Street closed yesterday’s session with modest declines. Today, however, gains on U.S. indices accelerated after the rollover, with the US500 rising nearly 30 points to 5734 points
- As the dot-plot indicates, FED bankers estimate that the US rate will reach 4.4% by the end of 2024 (5.1% was previously expected). For 2025, the Fed forecasts a median of 3.4%, with a previous estimate of 4.1%. Clearly lower than expected. Only one Fed member voted against the cut.
- Fed chair Powell at a press conference signalled, that consumption is almost resilient to higher rates, despite spreading inflation. In the effect, soft landing across the US economy is highly possible, without any serious loses for labor market. What’s more, some more dovish Powell remarks stressed that Fed is ready to support labor market if any weakness happen and is quite determined to hold its condition at current level
- The Asian session closed with very solid gains in both Chinese and Japanese stock indexes, with Nikkei (JAP225) and Hang Seng (HK.cash) futures gaining 1.8% and 2%, respectively. USDJPY is traded above 142.7 as US dollar weaken, supporting Japanese stock market sentiments
- The AUDUSD pair strengthened after readings from the Australian labor market; unemployment was unchanged at 4.2%, in line with forecasts, and the change in employment came in at 47.5k versus 26k forecast and 58.1k previously. At the same time, however, the change in full-time employment showed a decline of more than 3,000 against a 60.5k increase in July
- New Zealand’s Q2 GDP did not surprise markets, showing an annualized decline of -0.5% vs. -0.5% forecast and 0.5% growth in Q1. Quarter-on-quarter, it fell -0.2% vs. -0.4% expected decline and 0.1% growth in Q1 2024.
- EURUSD maintains a good portion of yesterday’s gains and is trading above 1,112. Gold has retreated from around $2,600 per ounce, but is still near $2,560, bolstered by dollar weakness; silver gains 2%. Yields on 10-year bonds are currently around 3.71%. European stock index contracts are also gaining on a wave of Wall Street optimism; the DE40 is trading near 0.6% and the EU50 is up over 0.8%.
- Investors are awaiting the Bank of England’s decision today, which could raise volatility on GBPUSD around 12 AM BST; at the same time, the Turkish CBRT will also decide on rates (both banks are expected to leave rates unchanged, according to markets). At 1:30 PM BST the change in unemployment claims from the U.S. and Philly Fed regional index will be published while at 3 PM BST we will learn US consumer sentiment according to, Conference Board. Volatility and appetite for hedging may increase before tomorrow, so-called triple witching day
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