As widely expected, the Federal Reserve kept US interest rates unchangedfollowing its latest FOMC meeting. However, markets are left puzzled, as the central bankseemingly dialled back on some of the downbeat tone seen in recent months.
Fed Chair Jerome Powell said that lower US inflation is “transitory” and the world’s most important central bank is apparently in no rush to adjust interest rates, suggesting that investors who had been pricing in a US rate cut this year had their expectations misplaced.
Moving forward, US inflation readings over the coming monthswill be seen as atest of Powell’s view whether the low US inflation is indeed “transitory”, or whether structural factors are at play towards keeping price growth persistently low. Should the latter perspective become more evident, that could prompt the discussion to open up back again asto whether the Fed should adjust monetary policy, in order to achieve its two percent inflation target.
It’s interesting to note that, at the time of writing, the Fed Funds Futures rate still shows a higher than 50 percent chance of an interest rate cut by December. This implies that certain segments of the market are still holding out hope that the Fed’s previously-communicated dovishness will eventually push through, and an inflation-boosting US rate cut is still on the cards for 2019.
Can the Dollar Index climb back above 98?
As markets continue digesting the latest Fed commentary, the Dollar Index has climbed near 0.6 percent and is trading around the 97.6 level. Meanwhile, Asian currencies are mixed against the Greenback, even as Japanese and Chinese markets remain closed for the rest of the week.
Dollar investors will then turn their attention to Friday’s US non-farm payrolls report, where a number that exceeds market expectations of 190,000 jobs created last monthshould encourage the Dollar’s year-to-date bullish trend to remain intact.
While a higher NFP print implies that the jobs market in the United States and in turn, economic momentum should remain robust, the wider question that is now being asked on an ongoing basis is whether the strength in the labour market is translating into consumer spending.
Brent to test $71/bbl support line as Oil’s supply risks come to the fore
Brent futures have now fallen by more than three percent from its year-to-date high and is now trading below the $72/bbl mark, following a surprise jump in American crude inventories. The growing US stockpilesare a sign that OPEC+ producers still have their work cut out for them in rebalancing the global Oil markets, and may have to extend its production cuts programme going into the second half of 2019.
In addition to supply risks out of Iran, Libya and Venezuela, should the demand side hold up its end of the bargain, that could ensure that conditions are conducive for Oil prices to reverse recent losses, as the $71/bbl mark remains a key support level over the near-term.
Disclaimer:This written/visual material is comprised of personal opinions and ideas. The content should not be construed as containing any type of investment advice and/or a solicitation for any transactions. It does not imply an obligation to purchase investment services, nor does it guarantee or predict future performance. FXTM, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability for any loss arising from any investment based on the same.
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 90% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Recommended Content
Editors’ Picks
EUR/USD drops below 1.0800 after German Retail Sales data
EUR/USD has come under fresh selling pressure and trades below 1.0800 after the data from Germany showed that Retail Sales declined by 1.9% MoM in February. Resurgent US Dollar demand is adding to the downside in the pair. US data are next in focus.
GBP/USD stays weak near 1.2600 amid market caution
GBP/USD remains defensive near 1.2600 in European trading on Thursday. The hawkish tone from Fed Governor Christopher Waller keeps the US Dollar afloat amid a cautious trading environment ahead of key US data releases and the Good Friday trading lull.
Gold price holds strength ahead of US core PCE inflation
Gold price holds onto gains near $2,200 in Thursday’s European session. The precious metal exhibits firm footing ahead of the United States core PCE Price Index data for February, which will be published on Friday.
XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC
XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase.
Portfolio rebalancing and reflation trades emerge into Q2
Yesterday’s price action pointed at a possible end-of-quarter portfolio rebalancing as the session saw the laggards of the quarter like Apple and Tesla gain, and the stars like Microsoft and Nvidia retreat.