What you need to know of Thursday, January 28:
Risk aversion took over financial markets mid-London session after ECB Government Council´s member Klass Knot made explicit comments related to future possible central bank policies. According to him, the central bank could decide to cut its deposit rate further below zero if that proved necessary to keep its inflation target in sight, adding that the ECB has tools to counter the EUR’s appreciation if needed.
The dollar appreciated against all of its major rivals and Wall Street plummeted at the opening, eased ahead of the Federal Reserve announcement, and resumed afterwards. US indexes finished the day with sharp losses. The three major indexes lost roughly 2% each.
The US Federal Reserve left rates unchanged at 0%-25%bps Purchases remain unchanged at USD 80 billion USTs and USD 40 billion MB. Policymakers noted that the pace of US economic activity and employment has moderated in recent months. It was quite a dovish statement, although chief Powell added that some developments point to a better outcome later in the year.
Crude oil prices jumped higher following the release of the EIA stockpiles report, which showed that US inventories fell a whopping 9.91 million. WTI settled around 52.65, weighed by the sour tone of equities. Gold finished lower at $1,842.00 a troy ounce.
Commodity-linked currencies were the worst performers, undermined by Wall Street’s slide. AUD/USD and USD/CAD are poised to extend their declines.
EUR/USD held above 1.2060, the 38.2% retracement of its November/January rally. GBP/USD trades sub-1.3700 but the bearish potential seems limited. In general, it seems the dollar is poised to extend its advance.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.