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Markets Update: US Stocks Rally, Bonds and Gold Surge as Dollar and Yields Slump in Response to Dovish FOMC.
Economic Calendar
Global Markets Roundup: 14 Dec 2023
US stocks rallied sharply on Thursday, boosted by the Federal Reserve's (Fed) more dovish than expected policy announcement. The Fed kept interest rates unchanged but made dovish tweaks to its statement guidance and cut its 2024 median dot by more than expected. This signaled a more cautious approach from the Fed, which has been tightening monetary policy to combat inflation. Bonds also surged, with the US 10-year Treasury yield falling below 4.0% for the first time since August. This move was driven by expectations that the Fed will be less aggressive in raising rates in the coming months. The dollar and US yields slumped in response to the Fed's announcement. The dollar index (DXY) fell as low as 102.42, while the 10-year Treasury yield fell to 3.94%. European equity futures are pointing to a higher open, with the Euro Stoxx 50 futures up by 1.1%. This suggests that European markets are also reacting positively to the Fed's announcement.
The ASX 200 was lifted by rate-sensitive sectors, while the Nikkei 225 retreated amid selling in the banking sector and a stronger currency. The Hang Seng and Shanghai Composite initially rose but then pared gains on subdued data. The ASX 200 rose on the back of a decline in yields and stronger-than-expected employment data. The Nikkei 225 initially climbed but then retreated, weighed down by weakness in the banking sector and a stronger yen. The Hang Seng and Shanghai Composite initially gained after the Hong Kong Monetary Authority kept rates unchanged in line with the Federal Reserve, but gains were limited by disappointing Chinese loan and aggregate financing data.
FX The US Dollar Index (DXY) retreated further below 103.00 in reaction to the Federal Open Market Committee (FOMC) lowering the median dot plot to imply three rate cuts in 2024. The FOMC's dovish stance sparked a rally in EUR/USD, which extended its post-FOMC advances and reclaimed the 1.0900 handle. GBP/USD also climbed towards the 1.2650 level, while USD/JPY continued its slide and briefly breached 141.00. Antipodean currencies benefited from broad dollar weakness, with AUD/USD also helped back above the 0.6700 level after the latest jobs data. NZD/USD was ultimately unfazed by the surprise contraction in Q3 GDP.
FIXED INCOME 10-year Treasury futures made further headway above 112.00 following the dovish FOMC statement and press conference. The US 10-year Treasury yield eventually dipped below 4.0% for the first time since August. Bund futures extended their gains from yesterday, firmly holding above 136.00 ahead of the European Central Bank (ECB) policy announcement. 10-year JGB futures were initially lifted in tandem with global peers but retreated after weaker demand at the latest 20-year JGB auction.
COMMODITIES Crude oil futures traded rangebound amid a lack of fresh energy-specific catalysts. Brent and WTI futures saw their upward momentum stalled by resistance around the USD 75/bbl and USD 70/bbl levels, respectively. Spot gold extended its gains from yesterday, surging above USD 2,000/oz on the dovish FOMC. Copper futures held onto their post-FOMC gains amid the constructive mood and weaker dollar.
Looking ahead, key highlights include:
US Export & Import Prices:Â The US Bureau of Economic Analysis will release data on US export and import prices at 8:30 AM ET.
IJCs:Â The Institute for Supply Management (ISM) will release its manufacturing purchasing managers' index (PMI) for December at 10:00 AM ET.
Retail Sales:Â The Commerce Department will release data on US retail sales for November at 8:30 AM ET.
Australian PMI (Flash):Â The Australian Bureau of Statistics will release its flash manufacturing PMI for December at 9:30 AM AEDT.
BoE, ECB, SNB, Norges & Banxico Policy Announcements: The Bank of England (BoE), the European Central Bank (ECB), the Swiss National Bank (SNB), Norges Bank, and the Bank of Mexico (Banxico) will all announce their monetary policy decisions.
ECB’s Lagarde Press Conference: ECB President Christine Lagarde will hold a press conference following the ECB’s policy announcement.
Supply from US: The Commodity Futures Trading Commission will release its weekly data on the supply of crude oil, gasoline, distillates, and natural gas.
General news - Information source from multiple newswires.
The article and the data is for general information use only, not advice!
The Trade Academy Team
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