Fed cut affirmation
The clear affirmation from Fed chair Jerome Powell on an imminent rate cut places a plug on the doubts and sets markets on gains going into the Thursday session.
Clear signal for July cut
The highly anticipated testimony to Congress by Fed chair Jerome Powell had seen to a reassurance on the likelihood of a July cut despite the latest June jobs report surprise, highlighting that the latter is unlikely to contribute significantly to the return of inflation, a pain point for the Fed. The view had also been in line with the latest June Federal Open Market Committee (FOMC) minutes release which showed that members saw policy easing in the ‘near term’, altogether locking in the expectations for the 25-basis points cut in July.
Arguably, this is nothing new with the market having priced in the expectations, but it had certainly cleared some of last week’s doubts. At the same time, it had reflected the more amenable view from the Fed with regards to further accommodative stances. As it is, a slight tick up in expectations for rate cuts can be seen with two 25-basis points cut priced in by year-end.
On FX, with the Fed opening the door towards easing, the US dollar index can be seen falling back towards the uptrend support, once again at an inflection point. What the latest update does from Fed Powell, while of importance, seals only the move for the July meeting. Geopolitical and data influences are expected to remain important as we move to consider the Fed’s move for the rest of the year. Look to the US June CPI data later in the session for guidance of direction. Any disappointment here could once again return the greenback into a downtrend.
Source: IG Charts
As told, Asia markets likewise have the Fed support to celebrate into Thursday. While Wall Street saw to fresh records including the S&P 500 index briefly breaching the 3000 level, Asia markets may see a more moderate pace with gains. A relatively quiet session lies ahead in terms of data for Asia markets, but watch the CPI data as told above.
Yesterday: S&P 500 +0.45%; DJIA +0.29%; DAX -0.51%; FTSE -0.08%
The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.
Take a position on indices
Deal on the world’s major stock indices today.
- Trade the lowest Wall Street spreads on the market
- 1-point spread on the FTSE 100 and Germany 30
- 2-point spread on Switzerland Blue Chip
- The only provider to offer 24-hour pricing
Live prices on most popular markets
You might be interested in…
Find out what charges your trades could incur with our transparent fee structure.
Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.
Stay on top of upcoming market-moving events with our customisable economic calendar.