Mixed Reaction to Cautious Fed – S&P off 0.34%
US Stocks markets had a mixed end to the trading day and the UsdJpy was smashed as a more cautious than expected Jerome Powell updated markets at the end of this month’s FOMC meeting. The marginally more dovish than expected tone added further volatility to markets. After an initial surge, the major indices closed mixed, the Dow gaining 0.23%, with the more tech-heavy S&P and Nasdaq finishing in the red, down 0.34% and 0.33% respectively. The most volatile reaction came yet again in FX markets as UsdJpy was smashed from 157.50 to near 153.00 in short order – still no confirmation of any official action again so far. The dollar index was lower on the day in line with the more dovish stance, down 0.44% to 105.85. US Treasury yields dropped hard after the Fed, the 2-year losing 8.2 basis points to 4.960% and the 10-year off 4.5 basis points to 4.638%. Oil prices took a big hit as US stock data surprised to the topside and hopes of a ceasefire continue to increase, Brent off 3.4% to $83.44 a barrel and WTI down 3.6% to $79.00 a barrel. Gold, however, jumped, gaining 1.7% in line with the lower dollar to trade up to $2,323 on the close.
Dollar Sinks on More Dovish Federal Reserve
The dollar took a significant hit in late trading in New York yesterday as Jerome Powell and the FOMC gave a slightly more dovish update to markets than had been expected. There had even been some fears that the dreaded ‘hike’ word may even come into play after recent higher-than-expected inflation data prints in the states and investors were definitely concerned about the potential another pivot from the Fed. However, the guidance remained consistent with most of the recent comments from FOMC members that rates are likely to stay higher for longer but that the next move will most likely be a cut. The move for the greenback was exacerbated by a very strong drop in the UsdJpy where once again the market is left guessing as to whether there was any official action from Japanese authorities and now most traders are expecting to see more volatility ahead as the market focus moves swiftly to tomorrows Non-Farm Payrolls data release.
More Volatility Ahead as Traders Return to Desks
It was a strange trading day yesterday with a large section of the financial markets closed for May Day celebrations on the same day that the world’s most influential central bank gave the market its latest rate update. Traders are expecting more volatility in the days ahead as those centers get back to work and the market digests what the Fed had to say and prepares for more big data ahead. The Asian session has little on the agenda today, so we may see some smoother trading conditions as liquidity returns to normal levels. The London open sees some key CPI and Retail Sales data out of Switzerland but the focus will once again be on the US session and its full reaction to the Fed update. There is some data out in the form of the weekly unemployment claims numbers, and we are set to hear from the Bank of Canada’s Tiff Macklem again but expect the Fed update and preparations for tomorrow’s Non-Farms to dominate sentiment.
