US Stocks Dip on Fed Hold – Dow down 0.4%
US stocks largely dipped in trading overnight after the Fed kept interest rates on hold and Jerome Powell warned that a September cut is not a given. The Dow dropped 0.38% to 44,461, the S&P lost 0.12% to 6,362, while the Nasdaq gained 0.15% to move to 21,129 on solid earnings from Microsoft and Meta. The dollar jumped higher again on the Fed update and strong US data prints, the DXY up 1.06% to 99.95. US Treasury yields also leapt higher, the 2-year up 7.2 basis points to 3.941%, and the 10-year up 5 basis points to 4.370%. Oil prices pushed higher again as traders continued to price in increased measures against Russia from the US, Brent up 1.32% to $73.47 and WTI up 1.14% to $70.00 a barrel. Gold fell hard on the data and Fed update, losing 1.54% on the day to finish at $3,274.50 an ounce.
Markets Reprice After Fed Update – Dollar Surges
The Federal Reserve Bank kept interest rates on hold in the US last night, as was fully expected by the market. Despite two dissenters on the committee, who voted for a 25-basis point cut, expectations have now pulled back for a cut in September. The futures market is now pricing in a 46% probability of a cut in September, against a 65% chance just a day ago, and the dollar has responded accordingly, gaining over 1% in the last few trading sessions. Jerome Powell did not bow to the political pressure that has been placed on him over recent weeks but indicated that the committee will wait for more data to make its decision in September. Fortunately for the market, we have both key inflation data and jobs data in the next two days, so expect more volatility around the Core PCE Index data tonight and, of course, the Non-Farms data set tomorrow.
Another Huge Calendar Day Ahead for Traders
It is another massive day ahead on the macroeconomic calendar today with another key central bank rate update due alongside a raft of fresh data updates. The Asian session is especially busy with Australian Retail Sales numbers (exp +0.4% m/m) due out at the same time as Chinese Manufacturing PMI (exp 49.7) and Non-Manufacturing PMI data (exp 50.3), before focus moves swiftly to Japanese markets for the latest interest rate update from the Bank of Japan, where they are firmly expected to keep rates on hold. The European session sees the latest release of Prelim German CPI data, with a 0.2% increase expected across the six states. Once again, there is a raft of key data due out once New York opens. Canadian GDP numbers are due out (exp -0.1% m/m) early in the session; however, these are likely to be overshadowed by US numbers released at the same time, with the Fed’s favourite inflation dial, the Core PCE Price Index data (exp +0.3% m/m), due out alongside the Employment Cost Index (exp +0.8% q/q) and the Weekly Unemployment Claims numbers (exp 222k).
