Last night’s FOMC results were largely as expected with the exception of the press conference which once again proved to be hesitant and uncertain in giving a set direction. The FED has decided to keep rates unchanged, however 3 out of 12 FOMC members have opted to raising rates in September. Chances for a December rate hike have now been lifted, especially since Janet Yellen stated last night that “the case for an increase had strengthened” but the committee “decided for the time being to wait for continued progress toward our objectives. The Fed also released its updated economic outlook and appropriate pace of monetary policy. Revisions were concentrated in 2016 as GDP growth and headline inflation were downgraded. while the unemployment rate was bumped slightly higher. Previous estimates for 2017 and 2018 were unchanged.
Currencies: Overall the USD weakened after the FED announced that its policy is to keep rates unchanged. EURUSD dipped to 1.1135 but quickly rebounded towards 1.1200. GBPUSD managed to recover from 5 week lows set 2 days ago and bounced from 1.2960 areas to over 1.3040. The biggest loser however was the USDJPY which dropped all the way from 102.75 after the BOJ meeting yesterday to 100.15 (260 pips). Commodity currencies such as AUD and CAD have also strengthened against the Dollar.
Stocks: Asian shares have surged higher following the FED decision last night. In Hong Kong, the Hang Seng Index and Korean Kospi both gained 1%, while the S&P/ASX 200 ascended 0.8% and the Shanghai Composite Index tacked on 0.7%. In Japan, financial markets were closed for a public holiday. The pattern was also the same in Europe and the US. European stocks closed at 2 week highs, while US indices rallied also into the sessions close, helping the Nasdaq post an all-time high, surpassing its previous record set on September 7th.
Oil and Gold: Oil prices bounced between gains and losses but managed to trend higher extending their gains to 1% after a shocking third consecutive weekly American crude inventory draw tightened the energy market. US West Texas Intermediate crude futures were trading at $45.81 a barrel, showing a 1% rise from their previous close. Yesterday, the OIL had already gained 3%. Gold surged higher to $1334 on the back of a weaker Dollar.