Fed fuelled the market’s optimism by taking a dovish stand, despite unveiling 0.25% rate hike. Not only the mentioning of easing inflation fears and readiness for slower rate hikes but a surprise rate cut talks from the top hawk Chairman Jerome Powell also favored the risk-on mood and drowned the US Dollar to the multi-day lows.
As a result, the EURUSD, AUDUSD and Gold refreshed multi-day highs while the GBPUSD also manages to push back bears. The Oil prices, however, failed to cheer the softer USD and OPEC+ inaction.
The previous day’s moves remained present during early Thursday as traders await monetary policy decisions from Frankfurt and London. Also important will be the quarterly employment supportive data and US Factory Orders.
It’s worth noting that the Fed’s dovish turn is a blow to the major central banks when the BoJ is too hawkish, which in turn weighs on the USDJPY prices while also suggesting an end to the risk-off season after multiple months of dominance.
In addition to the forex and commodities, the Fed also allowed the cryptocurrencies to cheer the softer greenback even as regulatory fears loom.
Following are the latest moves of the key assets:
Markets remained mostly silent during early Thursday as traders await another round of volatility induced by the key central banks from Europe and the UK, as well as by the US data. Adding strength to the market’s optimism were upbeat Aussie housing market figures and China’s readiness for further stimulus to bolster economic growth, not to forget BoJ policymakers’ comments suggesting more moves to defend the yield curve.
Additionally, a ray of hope for the Aussie-China ties and a light calendar elsewhere added strength to the risk-on mood, which in turn kept the US Dollar down while the stocks in Asia-Pacific mildly bid. It’s worth noting, however, that a bounce in the Treasury bond yields and cautious mood before the top-tier events restricted the market’s moves.
Talking about cryptocurrencies, BTCUSD and ETHUSD jumped to the highest levels in six and five months respectively before retreating. Even so, the riskier assets stay positive as institutional traders gain confidence after the FTX fiasco.
Early Thursday’s move shows that market players are tired of volatility. If so, the remaining days of the week will be more tiring as the European Central Bank (ECB) and the Bank of England (BoE) will join the early signals for the US jobs report to fuel momentum. Following that, Friday’s US employment data and ISM Services PMI will offer the last blow to the markets.
While the ECB and BoE are both up for 0.50% rate hike, the Euro is likely to gain more in case of hawkish ECB than the British Pound if at all the BoE manages to ignore the UK’s economic hardships. On the other hand, US jobs report and services activity data will be closely examined as the Fed has shown readiness for rate cuts if inflation eases after and the employment conditions improve, which in turn could weigh on the US Dollar and propel the commodities and Antipodeans.
May the trading luck be with you!