Forex:Stocks pause on Fed’s warning

There is a cloud of wariness hanging over global equity markets today, after Fed officials…

There is a cloud of wariness hanging over global equity markets today, after Fed officials forecasted no interest rate hike until at least 2022, perhaps slightly denting some of the optimism over a rapid recovery in the US economy. Asian stocks and US futures are lower, after the S&P 500 and Dow Jones index declined by 0.5 and one percent respectively.

Federal Reserve Chairman Jerome Powell, as expected, stuck to his message that the central bank will keep rolling out support measures until the American job market has recovered sufficiently. Powell also said that the Fed is “not even thinking about thinking about raising rates”. Despite the profit-taking seen overnight, equity bulls should be able to draw plenty of comfort from the Fed’s reassurance that its support measures will be around for as long as needed. Such an environment, coupled with the calls for more fiscal stimulus, should create conducive conditions for stocks to reach greater heights in the interim.

With firming expectations over lower-for-longer US interest rates, no surprise then that the Dollar index (DXY) is now testing the 96.0 support level to trade around its weakest levels since March.

The weaker Dollar and the Fed’s dour outlook combined to send Gold surging past the $1730. Gold bulls have been seemingly relentless, bringing Bullion prices back from sub-$1700 territory to notch a gain of nearly three percent so far this week.

 


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