Fed Holds Off Yield Control Policy

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Mixed FOMC Minutes Support the Dollar

The US dollar saw a correction across the board on Wednesday as the FOMC minutes revealed concerns regarding the road to recovery.

Policymakers hinted at further aggressive stimulus measures and poured cold water on yield curve implementations, for now, which weighed in on market sentiment.

The US Index closed up 0.85% and targeted the 93-area as investors reflected on the Fed minutes. The index has been under increased pressure in recent months. It has moved from a multi-year high of $103 to a recent 2-year low of $92.15.

Risk appetite was evident with the USDJPY as the pair ended yesterday’s session 0.66% higher. The greenback highlighted itself to be a major driver in these current sensitive market conditions.

What a Difference a Day Makes

The main currencies rivaling the US dollar experienced a sell-off yesterday as the euro and pound ended lower by 0.79% and 1.09% respectively.

The greenback was bolstered by a mixed feeling from the Fed as the EURUSD pair fell below 1.19. The upcoming initial jobless claims released today could revive the dollar further as early indications hint to a drop of 4% from the previous month.

Attention will turn to the ongoing Brexit trade negotiations as tomorrow concludes the latest round of meetings. The pound will also look to recover from the heavily sold dollar yesterday as it attempts to recapture its 8-month high.

Indices Become Another Victim of the Fed

US indices were another casualty on the release of the Fed minutes. After the report, the Dow closed 0.3% whilst the S&P was off 0.4% and the Nasdaq traded 0.6% lower.

Apple could not make an impact as it became the first US company to reach a $2tln market cap.

With the market digesting the recent news from the Fed, it remains to be seen if the indices can bounce back to their lofty highs.

Risk Appetite Halts the Recovery, But for How Long?

The positive move in the dollar hurt gold as the inverse relationship between the two markets worked against the commodity.

The yellow metal was down 3.6% on Wednesday and closed well below the psychological $2000 price.

Crude Bulls Seeking $43

WTI closed indecisively as the EIA reported crude inventories fell by 1.6mln barrels. This was less than the expected 2.7mln.

OPEC+ expressed concerns that a second wave of Covid-19 could pose a threat to the recovery of oil. Global demand was taking place at a slower pace than expected as WTI maintained its gradual rise.

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