On Thursday, after prospects of a U.S. interest rate cut were reinforced by Federal Reserve Chair Jerome Powell, Asian stocks increased, and the dollar flopped.
The U.S. economy is still under threat from disappointing factory activity, tame inflation, and a simmering trade war. Stated by Powell on Wednesday in a meeting with his congressional supervisors.
The central bank seems ready to “act as appropriate” Powell said.
MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.8%, while Japan’s Nikkei grew 0.4%.
The Shanghai Composite Index strengthened 0.8%, South Korea’s KOSPI mounted 1%, and Australian stocks increased by 0.3%.
For the first time after following Powell’s remarks, the S&P 500 briefly crossed the 3,000-point mark.
Meanwhile, on Wednesday, U.S. stocks closed higher.
A senior strategist at Sumitomo Mitsui DS Asset Management said, “The markets had hoped for Powell to express dovish views and they got what they wanted,”
He also said, “The focus going forward is U.S. data, such as tonight’s CPI,” then added, “and whether the economy warrants a 50-basis point rate cut this month.”.
Restricting market expectations is a robust June U.S. jobs report which we saw earlier this month.
The Fed was led to lower rates by 50 basis points, and the markets to view a 25-bps cut as a more likely option.
At the Fed’s next policy meeting on July 30-31, the Fed chair’s cautious stance on the world’s largest economy helped recover some bets on heftier easing.
According to CME Group’s Fed Watch tool, the possibility of cutting a 50-bps grew to 27.6% from 3.3% on Tuesday.
The Federal Reserve’s Meeting Minutes
After the Fed’ last meeting in mid-June, a strong case for easing became impossible as policymakers felt.
After slipping 0.4% overnight, the dollar index against a basket of six major currencies stood little changed at 97.001.
The wake of Powell’s comments made it pull back from a three-week peak of 97.588.
The greenback glided 0.35% at 108.080 yen, a six-week high that scaled the previous day of 108.990 ended.
The euro pushed up 0.1% to $1.1263 after advancing 0.4% on Wednesday.
Following the overnight growth of 0.5% against the broadly weaker dollar, the Australian dollar was stable at $0.6962. Meanwhile, from a 2-1/2-week trough of $0.6910 Aussie, the surge helped to pull away.
On Wednesday, after tumbling, the 10-year U.S. Treasury yield was at 2.038%. Also, it was at 2.113% following the Fed chair’s congressional testimony from a three-week high.
Meanwhile, in commodities, the U.S. crude oil futures stretched the preceding day’s substantial advances to touch $60.67 per barrel as their highest since May 23.
As the U.S. crude inventories shrank with the major producers cutting nearly a third of offshore Gulf of Mexico production before of an expected storm, the contract had improved 4.5% on Wednesday.
The trading closed at $66.91; Brent crude also swept a six-week high of $67.15 per barrel.
As the Fed rate cut boosted the non-yielding precious metal with reinforced expectations, Spot gold grew to $1,426 an ounce, is its highest since July 3.