Mixed Day Finished a Strong Week on Wall Street – Dow down 0.8%
Major US stock indices closed out another strong week with a mixed day on Friday, but investors are still in a positive frame of mind after the Fed signaled rate cuts ahead. The Dow had the biggest movement, dropping 0.77% on the day with the S&P and Nasdaq circling flat territory, closing down 0.14% and up 0.16% respectively. US treasury yields dropped as traders continued to digest the latest Fed update, the 2-year down 3.7 basis points to 4.595% and the 10-year off 5.6 basis points to 4.215%. The dollar, however, ground higher against most of the majors, the Euro dropping back to the 1.0800 level and Cable trading under 1.2600. Oil dropped on the day as talk of a ceasefire in Gaza increased, Brent off 35 cents to $85.43 per barrel and WTI losing 44 cents to trade down to $80.63 per barrel. Gold continued its drop back off last week’s historic high, now trading around the $2,160 level.
Dollar Bulls Back in Control – Is FX ahead of the game Again?
Last week’s Fed meeting certainly threw a few cats in amongst the financial markets pigeons as most in markets expected Jerome Powell to acknowledge the recent higher inflation points more strongly in his post-statement conference. However, one standout reaction over the last few days has been the move in the dollar, which having taken a dip after the meeting has spent the next six sessions moving much higher as US data continues to come in stronger than expected. This move was backed up by FOMC member Raphael Bostic on Friday who now sees only 1 rate cut in 2024 in contrast to the 3 that are priced in. The dollar is now sitting near some interesting levels on a few of the major currencies including, Aud, Cad, Euro and Jpy and further appreciation in the next few days could see the greenback drive higher into fresh ranges.
Quiet Calendar Day to Start the Trading Week
After what was a busy and potentially pivotal week in the trading calendar last week, this week’s risk event calendar kicks off with what should be a relatively quiet day. The Bank of Japan Monetary Policy Meeting Minutes don’t normally make too many waves in the market, but this morning’s release could be a little bit spicier given the fact that the bank raised rates for the first time in 17 years last week and the Jpy is now sitting on precariously low levels. There is little on the calendar in the European session, but the US New Home Sales data is due out in the New York session, and we note that FOMC member Raphael Bostic is talking again earlier in the day. Given his more hawkish comments on Friday, there could be more moves in the market around what he has to say today.
