The minutes from the FOMC meeting last night revealed that the committee is divided on the outlook of interest rates in the near term as 2 members voted for an immediate hike, while others said an increase should soon be considered. Overall, it appears that raising rates will materialize only after inflation will pick up, hence traders will now focus on Inflation and Retail Sales data. Fed fund futures are pricing in 15% chance of a September hike and 50.3% chance of a December hike. Focus will turn to Fed chair Janet Yellen’s speech at Jackson Hole symposium on August 26. Investors would now await the release of Euro-zone’s CPI data for July along with the ECB’s monetary policy meeting minutes. In the US, initial jobless claims and the Philadelphia Fed index, all due later in the day, would get significant market attention.
Currencies: The USD has lost ground following the FOMC event last night after the committee failed to signal a timing for raising rates. The minutes further indicated that board members were generally upbeat about the nation’s economic outlook and labor market. Major movers have been JPY which again broke the 100 barrier and traded at 99.64. focus now turns to 98.32 which is the post Brexit Low. AUDUSD was also a major mover overnight, rising 0.55% to 0.7718 after early morning data indicated that Australia’s unemployment rate unexpectedly fell to 5.7% in July, amid a surge in part-time jobs, whereas markets expected it to remain steady at 5.8%.
Stocks: Shares in Asia are mixed, with Nikkei trading -1.46% due to the rise of the JPY which hurts the nations exports. Overnight, US stock markets staged a late night rally, managing to close in positive territory despite recording losses in excess of 0.5% during the session. The Dow Jones Industrial Average rose 21.92 points, or 0.1%, to close at 18,573.94, after being down as many as 83 points earlier in session. With no significant changes in economic activity, some risks from the U.K.’s vote to leave the European Union and low inflation, the Fed is still very much divided over the subject of raising interest rates while leaving the door open for a possible rate hike this year.
Oil and Gold: Oil prices rose 0.45% or 21 cents higher. Oil rallied about 11% over the past 4 sessions since Saudi Arabia encouraged speculation the group was ready to reach an output freeze agreement with non-OPEC producers. The markets briefly extended gains after the U.S. Energy Information Administration (EIA) said domestic crude inventories fell 2.5 million barrels last week, surprising analysts who had expected a build of 522,000 barrels. GOLD Rose to $1350 following last night’s FOMC release as the low interest rate environment is beneficial for the yellow metal as it attracts investors seeking higher returns than the non-existent yield in long term fixed deposits and Treasuries.