US Dollar Weakened After Fed Powell’s Speech, Stock Markets Rallied

Market Reviews

On currency markets, the US dollar fell notably and is trading as the weakest one. Meanwhile, Japanese yen, Swiss franc and euro are trading stronger today. For the week, Japanese yen is the weakest one, followed by Canadian dollar. New Zealand dollar and Australian dollar are the strongest ones.

On stock markets, major US indices recorded solid gains overnight. DOW added 2.5%, S&P 500 jumped 2.30% and NASDAQ gained 2.95%. In Asia, Nikkei added 0.69%, China Shanghai SSE gained 0.28% and Singapore Strait Times rose 0.83%. But Hong Kong HSI dropped 0.13%.

US Treasury yields were mixed. Five-year yield closed down -0.029 at 2.856. 10-year yield dropped -0.011 to 3.044. But 30-year yield rose 0.010 to 3.329.

US Federal Reserve Chairman Jerome Powell said interest rates are “just below neutral,” signaling a potential end of the bank’s cycle of rate hike. Powell said on Wednesday that the Fed’s interest rate of 2 to 2.5% was just below the neutral level. As recently as October, however, Powell had said the rate was “a long way” from neutral. Meanwhile, minutes from the Fed’s meeting earlier this month are set to be released today and are expected to provide some indication of future interest rate hikes.

Following the UK Government, the Bank of England also released its economic analysis of different Brexit scenarios yesterday. The UK central bank stated, that in case of economic partnership with EU after Brexit, GDP will be 1.75% higher by end of 2023. Also, unemployment rate will be at 4%, and inflation is expected to be at 2.25%. Meanwhile, in case of no deal, no transition, in the worst case, GDP will fall -4.75 to -7.75% lower by the end of 2023. Also, unemployment rate will jump to 5.75-7.50 and inflation will peak at 4.25 to 6.25%.

Today’s data showed, that New Zealand ANZ business confidence was unchanged at -37.1 in November. Activity outlook rose 0.2 to 7.6. Japan retail sales rose 3.5% yoy in October versus expectation of 2.7% yoy. Australia private capital expenditure dropped -0.5% in Q3, below expectation of 2.0%.