Markets Remain Volatile – Nasdaq up 0.9%
It was another volatile session across global markets overnight, with US equity indices finishing mixed as fresh comments from President Trump reignited uncertainty and sent traders scrambling. The Dow Jones bore the brunt of the selling pressure, sliding 0.83% to close at 49,003, while the broader S&P 500 rose 0.41% higher to finish at 6,978. Tech stocks again outperformed, with the Nasdaq rising 0.91% to a fresh close at 23,817. The US dollar had a brutal session, suffering its worst daily fall since last April’s so-called “Liberation Day”. The dollar index dropped 1.32% to 95.76, marking a fresh four-year low, after President Trump commented that he was unconcerned by the currency’s recent decline. US Treasury markets were comparatively subdued ahead of tonight’s highly anticipated FOMC rate decision, though yields were mixed across the curve. The 2-year yield edged 1 basis point lower to 3.573%, while the 10-year yield ticked 3.2 basis points higher to 4.243%, reflecting ongoing uncertainty around the Fed’s next move. Commodities surged on the weaker dollar backdrop. Oil prices jumped more than 3%, supported by a combination of supply concerns and the sharp drop in the greenback. Brent crude rose 3.05% to $67.59 a barrel, while WTI matched the move, climbing 3.05% to $62.48. Precious metals once again stole the spotlight, with gold powering to yet another record high. The yellow metal surged 3.42% to trade around $5,180 an ounce and is now hovering just shy of the $5,200 level.
Dollar Under Pressure for FX Traders
It has been a dramatic fall for the dollar over the last few days, with the DXY sinking from annual highs above the 99 level to fresh four-year lows in the space of four days. The initial catalyst for the move was undoubtedly the actions on Friday from the Bank of Japan and Federal Reserve Bank to intervene – or threaten to intervene. Most experienced traders now agree that there has been some significant selling going through the market. This sent USDJPY tumbling, and the ripple of dollar selling has turned into a wave across the other majors. The DXY had found some support on the daily chart on the long-term trendline; however, those comments from President Trump on the dollar overnight put the nail in the coffin and have sent the dollar tumbling to new lows. The majors are all trading into fresh ranges this morning, and traders are expecting plenty of further moves, with the trend now looking set for more dollar losses.
Busy Calendar Day Ahead – Fed in Focus
Looking ahead, traders are bracing for another busy and potentially volatile session, with key economic data and major central bank decisions due. The Asian session will see the focus move from geopolitics to data – however briefly – early in the session, with Australian markets in focus for the latest CPI data release. The market is expecting the monthly data to show a 0.7% increase, with the year-on-year number pushing higher to 3.5%. There is very little on the event calendar in the European session; however, the New York session is bookended by the two major North American central banks’ rate calls, in addition to any fresh updates on the news wires. The Bank of Canada is first up earlier in the day, before we hear from the Federal Reserve Bank near the end of the session. Both banks are expected to keep rates on hold; however, traders are expecting moves in their respective markets on forward guidance from the statements and press conferences.
