US stock markets

The US Federal Reserve came in with a hike to the Federal Funds Rate, as expected, bringing the rate to 2.25%. The Fed’s current dot plot of rate hike expectations also shows another rate hike likely in December, also as expected, with three more rate hikes to come in 2019 and at least one more in 2020, and the Fed is continuing to stay the course closely in-line with broader market expectations.

The major currency pairs based in US Dollar stuck closely to their middle grounds, with the Euro, the Yen and the Pound all remaining comfortably within their week’s ranges. The Dollar initially sold off quickly following the statement, but overall in today’s early session has reverse its losses.

The early European trading session is seeing a bout of short-selling at the opening bells, with EUR figures expecting to have only mild impact on the forex market. The preliminary German CPI due at 12:00 GMT and Italy’s 2019 budget meeting scheduled to take place today, expected to have a broader impact on the market.

Thursday brings a speech by the Bank of England’s (BoE) Governor Mark Carney, who is expected around 14:00 GMT, but after the US Fed’s as-expected showing in the markets on Wednesday, today is similarly all about the USD, with final annualized US GDP at 12:30 GMT as well as Core Personal Consumption Expenditure, and Carney’s speech finds itself bookended by US data, with Fed President Jerome Powell expected to begin speaking at 20:30 GMT.

Oil prices rose on Thursday even after weekly data from the U.S. Energy Information Administration (EIA) unexpectedly showed a build in U.S. stockpiles. Oil prices had jumped to near four-year highs in the past two weeks, as the prospect of tighter markets due to the upcoming U.S. sanctions against major crude exporter Iran in November were said to be supporting oil prices this week. Iran exported around 3 million barrels per day (bpd) of crude oil at its peak in 2018, equivalent to 3% of global consumption.

The gold price was volatile around the Fed statement as traders grappled with the understanding of the Fed’s removal of ‘accommodative’ which initially sent the greenback lower as the market figured that the Fed was coming to the end of its tightening cycle at the long end of the dots while it gets closer to its neutral target. However, there was a sharp turning around in the dollar leading into when Powell confirmed that the Fed was staying its course in tightening with a bullish outlook for the US economy.