By Deepta Bolaky
It was a Fed day as investors awaited updates from the Federal Reserve Chairman Jerome Powell. Amid a fragile risk environment, markets are looking for support from central banks and governments. Given the US political gridlock over the fiscal stimulus package, the attention was switched to the Fed for guidance.
As widely expected, the Fed remained on hold and expects US politicians to break the deadlock and push for a new round of stimulus measures. Global stocks ended mixed – US stocks failed to keep the upside momentum following the Fed’s new dot plot.
After a strong session, Wall Street pared gains in the final hours of trading following the Fed’s speech:
In the FX space, major currencies remained mixed against the US dollar. The British Pound, the Japanese Yen and commodity-linked currencies were among the best performers.
The FOMC meeting was the main event on Wednesday. Amid the political gridlock and ahead of the US election, the Fed was unlikely going to put forward policy changes that could alter the election dynamics. Besides the labour market, the US economy is showing signs of improvement which might not warrant any action from the Fed at this stage. As widely expected, the Fed remained on hold and conveyed the message that more need to be done by US politicians.
The new dot plot shows that Fed’s policymakers expect no change in policy this year and borrowing costs will likely remain near zero through 2023.
The Japanese Yen remain well-bid following the election of the new leader, Yoshihide Suga who is broadly expected to follow the steps of the former Prime Minister.
On the economic front, the main releases were the inflation data in the UK and Canada and the Retail Sales in the US.
The advance estimates of U.S. retail and food services sales for August 2020, were $537.5 billion, an increase of 0.6percent (± 0.5 percent) from the previous month, and 2.6 percent (± 0.7 percent) above August 2019. However, the figures came below the expected 1%.
Crude oil prices traded firmly on the upside supported by bullish oil reports. After the API reported a draw of -9.517M in September 11 from the previous 2.97M, the EIA issued a stock change of -4.4 million barrels in the same week. As of writing, WTI Crude oil (Nymex) and Brent Crude (ICE) were trading slightly firmer around $39.97 and $42.09 respectively.
Gold struggled to edge higher following the Fed’s comments. However, the XAUUSD pair remained in familiar levels around $1,950.
Source: GO MT4
By Deepta Bolaky
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|Friday, 17 September 2020
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