Federal Reserve Signals One Rate Hike By End of Year

News Event

From Trading Economics: The Federal Reserve left the target range for its federal funds rate unchanged at 0.25 percent to 0.5 percent for the sixth time during its September 2016 meeting. Policymakers said that the case for a rate hike has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives. Three out of ten members voted for a rate hike. Fed Chair Janet Yellen, speaking after the central bank's latest policy statement, said US growth has strengthen and rate hikes would be necessary to keep the economy from overheating and fueling high inflation.

Market Snap



Market Opening Wrap

In Asian Equity Markets stocks rallied on Thursday, taking their cue from Wall Street, after the Federal Reserve left U.S. interest rates unchanged and slowed the pace of future hikes, knocking the dollar and lifting commodity prices. MSCI's broadest index of Asia-Pacific stocks outside Japan extended gains to 1.3 percent in its sixth straight session of increases. Australian stocks rose 0.8 percent, while South Korea's KOSPI  advanced 1.1 percent. China's CSI 300 index climbed 0.9 percent, and the Shanghai Composite moved up 0.7 percent. Hong Kong's Hang Seng jumped 1.5 percent. While Tokyo is on holiday on Thursday, stocks closed up 1.9 percent on Wednesday after the BOJ's shift to targeting a positive yield curve.

In Currency Markets the dollar stumbled to a near 4-week low against the yen on Thursday, after the U.S. Federal Reserve kept monetary policy steady and projected a less aggressive path for interest rates hikes in coming years. The greenback was flat at 100.38 yen, having weakened 1.4 percent on Wednesday to touch a 3-1/2 week low of 100.34.The euro edged up 0.2 percent to $1.1202, having pulled up from Wednesday's trough of $1.1123. The New Zealand dollar fell 0.2 percent to $0.7333. The RBNZ kept its benchmark interest rate unchanged at 2.0 percent on Thursday but reiterated that further easing will be required. The dollar index touched a low of 95.373 at one point on Thursday, its weakest level since Sept. 16.

In Commodities Markets oil prices rose around 1 percent on Thursday, extending gains from the previous session after a surprise third consecutive weekly U.S. crude inventory draw tightened the market. U.S. West Texas Intermediate crude oil futures were trading at $45.81 per barrel, up 1 percent, from their previous close. International benchmark Brent crude futures were also up, gaining 1 percent, from their last close to $47.31 per barrel. Prices jumped after a report from the U.S. Energy Information Administration showed a 6.2 million-barrel fall in crude oil inventories last week to 504.6 million barrels.  Spot gold was down 0.3 percent at $1,332.80 an ounce and spot silver touched a two-week high of $19.88 an ounce.

In US Equity Markets stocks  racked up gains on Wednesday after the U.S. Federal Reserve kept interest rates unchanged, for now leaving intact the low-rate environment that has helped underpin the bull market.  The Dow Jones industrial average rose 0.9 percent, to 18,293.7, the S&P 500 gained 1.09 percent, to 2,163.12 and the Nasdaq Composite added 1.03 percent, to 5,295.18. All 11 major S&P sectors finished in positive territory. Energy stocks were the best performing sector, up 2.1 percent, as oil prices rose. Fed Chair Janet Yellen, speaking after the central bank's latest policy statement, said U.S. growth was looking stronger and rate increases would be needed to keep the economy from overheating and fuelling high inflation.

In Bond Markets U.S. Treasury yields fell on Wednesday after the Federal Reserve downgraded its economic growth forecast and lowered its projection for interest rate levels needed to support expansion. The two-year Treasury yield, which is most sensitive to traders' views on Fed policy, was flat on the day at 0.778 percent after touching 0.848 percent, its highest level in more than three weeks, shortly after the Fed released its statement. In late trading, benchmark 10-year Treasury notes rose 9/32 in price for a yield of 1.655 percent, down 3 basis points from Tuesday.

Source: Institute of Trading and Portfolio Management