General Market Analysis – 08/05/25

US Stocks Push Higher After Fed Hold – Dow up 0.7%

The major US indices all pushed higher in trading yesterday after the Fed kept interest rates on hold. Jerome Powell advised that the Fed would maintain their ‘wait and see’ approach to the tariff impact. The Dow rallied 0.7%, the S&P rose 0.43%, and the Nasdaq gained 0.23%. Treasury yields pulled back again, with the 2-year down 0.6 basis points to 3.776% and the 10-year falling 3.5 basis points to 4.269%. The dollar pushed higher against the majors, with the DXY up 0.68% to 99.9. Oil prices dropped as concerns increased that a US-China trade deal would be some way off, with Brent down 1.83% to $61.01 and WTI down 1.93% to $57.96. Gold pulled back nearly all the previous day’s gains, dropping 1.95% to $3,363.43 an ounce.

Federal Reserve Stays Firm

The Federal Reserve Open Markets Committee held firm in the face of political badgering to keep interest rates on hold yesterday. Despite very public criticism of the committee and his leadership from President Trump, Jerome Powell delivered the expected hold on interest rates that the market had been predicting, advising that they would continue with the ‘wait and see’ approach with regard to the tariff impact on US data. Last week’s higher Non-Farms print indicated a resilient jobs market in the US, and many observers now feel that we will need to see a move higher in the unemployment rate before the Fed hits the button on the next rate cut. The market is now pricing in just a 20% chance of a cut at the Fed’s next meeting in June, with 60% still being priced in for July. However, traders will be watching US data closely, and if it does not start to show a weakening in the economy, expect those chances to be pushed out further.

Central Banks in Focus for Traders Today

Central Bank rate updates will remain front and centre for traders today as they digest and react to the Federal Reserve’s latest update and assess what the Bank of England does later in the day. The Asian session has little on the schedule in terms of macroeconomic updates, so expect the reaction to the Fed to continue through that session. However, once Europe opens, expect focus to move to UK markets and the latest call from the Bank of England. The market is expecting to see a 25 basis point cut from the committee, from 4.50% to 4.25%, after inflation data dropped last month, and anything away from this will see strong moves in the pound. The US session will see further moves on the back of yesterday’s updates, but traders will also be paying close attention to the Weekly Unemployment Claims numbers, which are expected to print around 230k.

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