Stocks Mixed After Fed Delivers on Rate Cut – Dow up 0.6%
US stock markets had a choppy reaction to the Fed’s highly anticipated 25-basis point rate cut in trading yesterday. The Dow pushed up 0.57% to 46,018, the S&P fell 0.10% to 6,600, and the Nasdaq dropped 0.33% to 22,261. The Fed’s update came largely in line with market pricing, penciling in two further cuts by the year-end, but the dollar and yields rallied. The 2-year yield added 5 basis points to move up to 3.553%, and the benchmark 10-year moved up 5.9 basis points to 4.087%. The dollar ultimately finished higher after an initial dip on the cut, with the DXY up 0.40% to 97.02. Oil prices fell back from recent highs, Brent down 0.83% to $67.90, and WTI off 0.73% to $64.05. Gold initially spiked to a new record level but then fell back with the stronger dollar, down 0.81% by the close at $3,659.32 an ounce.
Bank of England on Hold Today
The Bank of England is expected to keep interest rates on hold today after cutting by 25 basis points last month. Inflation data and employment numbers earlier this week largely came in on expectations, which has locked in the ‘hold’ from the MPC for most market participants. However, FX traders are still expecting to see some big moves in Cable around the event today. Traders will be focusing closely on the forward guidance from the MPC, with high inflation still a concern for many. Cable is now trading around the 1.3625 level, having spiked yesterday up to 1.3678 on the Fed announcement, but a more hawkish (or less dovish) update from the bank today could see those levels examined again swiftly—especially if the recent dollar bear trend resumes and interest rate differentials kick in for longer-term traders.
More Central Bank Action Ahead Today
Traders are expecting another busy day in financial markets with more data and central bank rate calls scheduled today on the back of the Fed rate cut late in the New York session. The Asian session has already seen New Zealand GDP data come in much lower than expected, which has put pressure on the Kiwi across the board. Later this morning, we have the Australian employment data due out, with the employment change expected to show a 21k increase and the unemployment rate expected to remain steady at 4.2%. The focus will again be on UK markets during the European day, with the Bank of England likely to keep rates on hold at 4.00%. The New York session is expected to see a continued response from yesterday’s Fed move from investors; however, we also have the weekly unemployment claims data (exp. 241k) and the Philly Fed Manufacturing Index (exp. 1.7) due out, which will add more to the mix.
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