Wednesday was a Fed day – global central banks have played a crucial part in providing aid and support to the global economy during the coronavirus pandemic. Faced with an unprecedented crisis, central bankers have rapidly deployed various monetary tools to keep credit flowing and support businesses and households.
Investors were eagerly looking forward to the Fed’s statement and forecasts for clues on how the Fed is viewing the health of the economy after easing lockdown measures. The Fed decided to maintain the target range for the federal funds rate at 0 to 1/4 percent. The Fed expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.
Wall Street ended on a mixed note following the Fed’s interest rate statement and economic projections. Chairman Jerome Powell forecasts a long and slow recovery for the US economy but states that they remain supportive to assist with the recovery:
- Dow Jones Industrial Average erased 282 points or 1% to 26,990.
- S&P 500 lost 17 points or 0.5% to 3,190.
- Nasdaq Composite rose by 67 points or 0.7% to 10,020.
Heavy-tech index closed at a record high lifted by strong gains by Microsoft, Apple and Amazon.
Source: Bloomberg Terminal
In the FX space, major currencies were firmer against the US dollar. The Fed has eliminated the scenario of a V-shaped recovery for the US economy and sees interest rates near zero through 2022. Both safe-haven and risk-sensitive currencies were among the best performers against the greenback.
Crude oil prices initially rose higher on the back of some dollar weakness following the FOMC statement. However, weekly oil reports this week are weighing on the energy market. Similar to the bearish API report seen yesterday, the Energy Information Administration reported an increase of 5.7 million barrels of US commercial crude oil inventories from the previous week showing that demand for oil remains soft. As of writing, WTI Crude oil (Nymex) and Brent Crude (ICE) are trading at $38.66 and $41.73, respectively.
Amid the reopening of economies, geopolitical risks and a weaker US dollar, the precious metal has been trading sideways within a $70 range as traders awaited for the next biggest catalyst. On Wednesday, a dovish-Fed pushed the XAUUSD pair significantly higher – to a high around $1,740 level. As of writing, gold has consolidated around $1,735.
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