Headlines:
- BOE leaves bank rate unchanged at 3.75% in 6-3 vote
- Long-end Treasury yields stay calm as markets digest the Fed
- Was the Fed really that hawkish or the market just overreacted? An objective overview
- Oil prices ease as Saudi Arabia projects to restore half pipeline capacity within days and Trump plans meeting with Gulf leaders
- S&P 500 looks for a technical bounce as 100-day moving average holds after the Fed
- Gold (XAU/USD) analysis: The market overreacts to Fed decision; Middle East and data now in focus
- This XAUUSD gold analysis video shows where the gold trade is after the Fed last night
- Euro area inflation nudges up in August to 3.2% as energy prices jump
Markets:
- Brent crude oil -2.3% to $103.40
- WTI crude oil -1.6% to $100.80
- 10-year Treasury yields -2.8 bps to 4.975%
- AUD leads, GBP lags on the day
- Gold +1.4% to $4,323
- European equities higher; S&P 500 futures +0.8%
- Bitcoin +0.5% to $76,490
It’s the day after the Fed and markets are deciding to take a bit of a breather as we see oil prices cool alongside bond yields.
Brent crude is down over 2% to $103.40 as Saudi Arabia is making additional crude cargoes available to Asian refiners through ship-to-ship transfers near Oman’s Sohar port. So, that is helping to cushion the blow of the impact on global supplies.
Meanwhile, 10-year Treasury yields are coming off the boil in falling slightly to 4.975% as traders continue to digest the Fed and overall inflation outlook.
Despite that, oil prices are still keeping above $100 and bond yields are still hovering near 5%. So, this is not the time for markets to be complacent as the better risk mood we’re seeing looks more closely tied to a relief bounce rather than a risk-on turn.
The dollar is also trading just a little lower on the day with USD/JPY falling back below the 156 level. The pound is the laggard after the BOE moved to keep the bank rate unchanged at 3.75%, with a 6-3 vote seen as expected. Pill, Mann, and Greene were the only policymakers to dissent in favouring a rate hike to 4% today. GBP/USD fell from 1.3405 to 1.3360 on repositioning flows, with traders having priced in roughly 30% odds of a rate hike for today coming into the decision.
In the equities space, European stocks are gaining modest ground while US futures are also pushing higher as investors are buying into the post-Fed relief for now. We’re also seeing gold push up by 1.4% to $4,323 as traders are hoping to catch a stronger bounce in the second half of the week.
With the Fed now out of the way, the focus turns back to the bond market in assessing whether yields have the appetite to keep chasing a break to the upside this week.
This article was written by Justin Low at investinglive.com.