Financial market research and analysis

The Federal Reserve didn’t dissipate the suspense surrounding the US’ monetary policy outlook. The FOMC left the target rate unchanged at 0.25% - 0.50% as anticipated. Although FOMC members mentioned their concerns regarding the slowdown in the US labour market, the accompanying statement suggested two interest rate hikes before the end of this year. FOMC Chair Janet Yellen put the focus on an improvement in wages and the inflation outlook, hence kept the possibility of a July hike on the table. The upcoming Brexit referendum in the UK, apparently gave the Fed another reason to not take action at this meeting. The US dollar weakened across the board.

Japanese markets took the biggest hit. The USDJPY slipped below the 105 mark for the first time since August’15 as the Bank of Japan refrained from expanding the monetary stimulus that the markets were craving for. As a knee-jerk reaction, the Nikkei wrote-off 3.05% while Topix cheapened by 2.78% in Tokyo.

It is the Bank of England's turn to give a verdict. The BoE is expected to keep the bank rate unchanged at 0.50% and its asset purchases target steady at £375 billion. At this last MPC meeting before the Brexit referendum, BoE’s Governor Carney could ring the alarm bell to warn UK markets and businesses across the island that a potential exit from the EU could have serious economic implications.

The FTSE failed to consolidate gains above 6000p yesterday. UK equity futures traded under a decent selling pressure in Asia. Energy stocks opened on a positive note despite a fifth consecutive day of slide in oil markets. Gains could be fragile.

Financials remain under pressure as Brexit risks weigh on investor sentiment, on top of an already challenging low-yield environment.

Gold is trading north for the seventh consecutive day. The yellow metal extended gains beyond the $1300 level by adding more than $20 dollars throughout the Asian trading session. Given that the sovereign yields remain under pressure, investors see little reason to refrain from investing in the yellow metal. From a technical perspective, a short-term negative correction could be healthy, as the market has stepped into overbought territory. Pullbacks are expected to find support at $1255 / $1245, area including the 50-day and 100-day moving averages. Downside corrections could be interesting dip buying opportunities for investors willing to strengthen their long positions.

Randgold (+3.48%) and Fresnillo (+2.48%) benefit from gold's rally in London.