General Market Analysis | 14 December 2023
Markets Surge as Fed Looks Ahead to Rate Cuts – Dow up 1.4%
US Stock markets surged higher again yesterday as Jerome Powell advised markets that the Fed is not likely to raise rates further in this cycle and Fed projections showed that they are expecting 75 basis points of cuts in the coming year. All three of the major US indices had been trading close to flat ahead of the announcement but jumped soon after with the Dow rising 1.4% to hit is first record close in nearly 2 years, the S&P and Nasdaq had similar reactions on the day, closing up 1.37% and 1.38% respectively. US treasury yields took a big hit, the benchmark 10-year dropping to its lowest level since August, down 18 basis points and the 2-year dropped 29 points to hit its weakest level since June. The dollar also took a beating, dropping 0.83% on the currency index and the move has continued into the Asian open. Gold surged back up through the $2,000 level adding a swift $40 on the day, although Oil remains unimpressive trading close to multi-month lows.
How Low Can You Go – Dollar Diving – Drops 0.8%
The dollar has taken a big hit overnight after the Federal Reserve has jumped on the bandwagon and delivered a dovish early Christmas present to the market. Risk markets have reacted strongly and stocks have jumped on the day, but it is certainly not good news for dollar bulls in the FX world as the dollar dropped 0.83% on the index against its major contemporaries. Some of the major pairs are now sitting on crucial levels as the fresh trading day kicks off and traders are expecting to see some big moves in the sessions ahead, the Aussie, Kiwi and Yen look poised for moves in the Asian session and Swiss in particular looks set for a big move once Europe opens up. It is sitting on some sensitive technical levels against the dollar and on the crosses ahead of the Swiss National Bank’s latest rate call today.
Big Day Ahead for Traders
The storm has finally taken hold in financial markets after a few days of relative calm. The Fed has thrown the dove amongst the pigeons and market reaction is likely to carry through for the next few sessions. On top of the Fed reaction there are also some strong tier 1 data releases out today as well as no less than three major central bank releases. The Asian session will see the focus on the Australian market once again with the release of the latest employment data down under. However, the European day will take centre stage with first the Swiss National Bank’s rate announcement followed swiftly by the Bank of England and the European Central Bank. To top it all off, the New York session has the latest Retail Sales numbers due out as well as the weekly unemployment claims data.