Originally published by Rivkin Securities
The Federal Reserve meeting was probably the main event of the night despite the fact that the market expected, and got, no rate hike. The statement released following the decision did move markets however, as gold spiked by almost $10 per ounce immediately upon the release but soon retraced the move. The board indicated that it may be willing to let inflation rise above the 2% target to some degree before clamping down with higher rates although a 25-basis point hike in June is still largely priced in by markets. Stocks reacted badly to the statement as the major indices went from unchanged to substantially down following the release. The Dow Jones Industrial Average closed down 0.7% as did the S&P 500. The Nasdaq 100 outperformed for the second day in a row although it still closed down 0.5%.
Like gold, the oil price also jumped following the release of the FOMC statement but also could not hold the gains. Earlier in the day, the Department of Energy report showed a much larger than expected crude build for last week as well as an unexpected build in gasoline inventories. US production also continues to climb having reached a new record high last week. The relatively strong prices are encouraging US shale producers to continue ramping up production.
The Australian dollar continues to trade below US$0.75 and a rally in the US Dollar Index overnight didn’t help the cause. US bond yields remain firm with the 10-year yield currently at 2.97%. Today Australia’s trade balance data will be released for the month of March. Continuing with the recent trend, another surplus is expected although it may be narrower than last month.
Data Releases:
- Australia Trade Balance 11:30am AEST