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Dollar Rallies, Equities Fall Post Fed

As expected, the Fed kept rates on hold. However, Wall Street tumbled overnight, and the dollar moved higher after the Fed dampened hopes of a rate cut later this year. The Dow tumbled 150 points, the S&P snapped a three-day winning streak and the dollar closed the session higher versus a basket of currencies as Jerome Powell suggested that recent softer inflation could be due to transitory factors and stuck to a neutral stance.

Basically, the market had gotten ahead of itself, pricing in a 65% chance of a rate cut. The Fed poured cold water on such expectations, forcing the market to reassess the likelihood of the Fed loosening monetary policy. Even as Jerome Powell was talking, market expectations of a cut declined, with a 50% probability of a cut now being priced in. This boosted the dollar. Stocks were less impressed as the prospect of tighter conditions saw investors pull out of equities.

US – Sino trade deal in sight?

Asian markets were mixed overnight as investors digested the Fed’s rejection of a rate cut by the end of the year. Trading was also subdued owing to public holidays in Japan and China. Stocks picked up on news that a US – China trade agreement could be announced as soon as next Friday. This comes as officials from both sides wrapped up the latest round of trade talks. Chinese Vice Premier Liu He will travel to Washington for more talks next week.

Trade news helped lift Asian markets to session highs, however any follow through in Europe has been limited. This is by no means the first time that hopes have been raised regarding a US – Sino trade deal. The reaction has been one of cautious optimism.

The dollar shot up on the Fed, the yen has continued to weaken on the improving geopolitical picture. USD/JPY rallied to a high of 111.67, after dropping to 111.05 pre-Fed.

Pound picks up on Brexit optimism & ahead of BoE

The pound is edging higher in early trade after being pulled from a $1.31 peak in the previous session. Progress in cross party Brexit talks and hopes of Theresa May compromising with Labour over a post Brexit customs union is keeping the pound buoyant. Attention is turning towards the BoE policy announcement later today. The central bank is not expected to hike rates. The extension of Article 50 to October will enable the central bank adopt a broader view on the economy. However, lingering Brexit uncertainties are expected to keep their hands tied on policy. We are expecting the BoE to remain sat on the fence.

Oil extends slide

After slipping 0.67% in the previous session, crude oil was sliding lower in early trade on Thursday. Rising crude stock piles are unnerving oil traders. Whilst continued OPEC cuts and sanctions on Iran and Venezuela have lifted the price of oil, record US crude oil production has led to a surge in inventories. Concerns are growing that stockpiles, which are the highest since 2017 could continue to grow.

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20-9-2019

Mixed sentiment on OECD warning, Mid-East tensions and squeezed US liquidity
Asian markets traded on varied risk sentiment on Friday, as a bag of mixed news left investors undecided on whether to enter or to exit risky assets.OECD warned that the global growth fell to the lowest levels since the last financial crisis amid the trade war… Read more

19-9-2019

Fed and BoJ leave investors yearning for more. BoE and SNB to stay pat, as well.
Markets gave a muted reaction to the Federal Reserve’s (Fed) decision to lower the main interest rates by 25 basis points to 1.75%-2.00% range.Fed President Jerome Powell said that ‘moderate’ interventions should suffice to overcome the economic weakness cause… Read more

18-9-2019

Markets expect the Fed to act beyond the fed funds rate amid repo crisis. UK inflation in focus.
The Federal Reserve (Fed) will announce its latest policy decision today. The Fed is broadly expected to lower the federal funds upper and lower target rates by 25 basis points to 1.75%-2.00% bound.But investors want to hear more about the Fed’s plans to incre… Read more

17-9-2019

Sovereign bonds gain. Pound traders watch Supreme Court hearing against Parliament suspension.
The drone attack on Saudi Arabia’s Aramco over the weekend rose geopolitical tensions and hammered the risk appetite. Investors are escaping equities and moving capital into the sovereign bond markets.The US 10-year yield retreated to 1.82%, as British and Eur… Read more

16-9-2019

Oil prices jump on Saudi attacks, equity futures fall and gold gains
Brent crude jumped 19%, as WTI crude surged 15% at the weekly opening bell, after a drone attack on Saudi Arabia’s state oil company Aramco halved the country’s production over the weekend. This has been the biggest one-time disruption in oil supply in the his… Read more

13-9-2019

Global equities rally, Eurozone yields converge after ECB delivers disputed stimulus
Asian equities gained after the European and US markets closed in the green, as the European Central Bank (ECB) delivered more stimulus to boost inflation and Trump administration hinted at an interim trade deal with China to ease tensions before the next face… Read more

12-9-2019

Euro tests $1.10 but ECB doves could be hard to satisfy
The European Central Bank (ECB) meeting is what matters the most to worldwide traders today. The ECB is expected to take monetary action at today’s meeting to give a boost to the depressed Euro zone economy as a result of the rising global trade tensions, slow… Read more

11-9-2019

Downside correction in sovereign bonds continues ahead of ECB, Fed meetings
Asian equities mostly gained on Wednesday, but stocks in mainland China remained on the back foot despite the Chinese government’s dismissal of quotas and approvals for foreign investors. The latter move was interpreted as a sign of desperation and an increase… Read more