News

Dollar Surges Post Fed Policy Meeting; Stock Futures Tumble

Dollar

The dollar index, which measures the greenback against a basket of major currencies, edged higher to a one-week high of 93.59 as the Federal Reserve monetary policy meeting outcome was not as dovish as the market was expecting. The Fed concluded its final monetary policy meeting ahead of the US election by keeping interest rates between 0.00-0.25% range and asset purchases at their prior levels. In his presser, Powell stated that the Fed believes the current policy stance is appropriate today and ready to adjust when needed. The new dot plot showed that there is only one member expecting interest rates to go above 0% in 2020, versus two members in June meeting. The dollar earned a nudge higher when he affirmed that the current asset purchases are appropriate. The EURUSD declined to a five-week low of $1.1737, and the risk-sensitive AUDUSD dipped to $0.7253.

Equities

Major US stock-index futures plunged post the Federal Reserve monetary policy meeting. Fed's Powell reiterated in his press conference that the economic activity remains well below pre-pandemic levels, and the economic path remains uncertain, especially with Covid19 untreated. Moreover, investors were looking for a more dovish stance following the policy shift announced in the Jackson Hole symposium. The Dow Jones Industrial Average futures declined to 27426, the S&P500 futures fell to 3309, and Nasdaq futures tumbled to 11001.

JPY

The Bank of Japan concluded its monetary policy meeting by keeping policy settings unchanged. The bank revised higher its outlook for exports and output. However, the economy is in a severe state but could be picking up. The Japanese Yen was not interested in the meeting outcome and continued higher against counterparts, where the USDJPY tumbled to 104.69, and the EURJPY plunged to 123.31, the lowest print since late July.

Metals

Gold prices drifted lower as the dollar gained strength following the Federal Reserve meeting. The price of a gold ounce declined to $1937, the price of a silver ounce dropped to $26.71, and palladium futures eased to $2377.

Oil

Oil prices eased slightly post their final rally on increased woes over the economic recovery. Fed's Powell declared that the economic activity remains "well-below" the pre-pandemic levels intensifying investors' fears. On the other hand, the US Energy Information Administration reported a sharp drop of 4.389 million in US oil inventories. Today, market participants are looking forward to the OPEC Joint Ministerial Monitoring Committee meeting. The West Texas Intermediate crude October delivery dropped to $39.40, and Brent Blend November delivery declined to $41.49.

Major Economic Events

GMT Country Event Expectation Previous

9:00

EZ

 CPI (MoM) (Aug)

-0.4%

-0.4%

11:00

UK

 BoE Interest Rate Decision (Sep)

0.10%

0.10%

12:30

US

 Initial Jobless Claims

850

884

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