Dollar weakens more after Fed minutes highlight risks

August 23, 2018

By IFCMarkets

US market ends mixed after Fed minutes

US stock market ended marginally lower on Wednesday. The S&P 500 inched lower 0.04% to 2861.82. The Dow Jonesindustrial average lost 0.3% to 25733.60. Nasdaq composite index however gained 0.4% to 7889.10. The dollar weakening continued as Fed minutes showed officials were concerned about trade disputes’ negative impact: the live dollar index data show the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, lost 0.1% to 95.075 but is rising currently. Stock index futures point to mixed openings today.

Trade dispute concerns were a topic of central bank officials’ discussions as most of them supported another interest rate hike in September. However a drag on global economy from continued trade disputes is seen as a reason to question the further pace of monetary tightening as “most expressed the view that an escalation in international trade disputes was a potentially consequential downside risk for real activity.” Fed fund market participants are currently pricing in 96% probability of a rate hike in September and 60% chance of another in December. Trading was relatively thin with the volume on US exchanges at 5.26 billion shares, compared to the 6.42 billion average over the last 20 trading days.

DAX 30 opens lower than main European indices

European stocks ended little changed on Wednesday as investors awaited the Federal Reserve minutes. The GBP/USD and EUR/USD slowed their climb but both are lower currently. The Stoxx Europe 600 less than 0.1%. Germany’s DAX 30 ended marginally higher at 12385.70. France’s CAC 40 rose 0.3% and UK’s FTSE 100 added 0.1% to 7574.24. Markets opened mixed today.

Pound and euro got a lift from UK Brexit minister Dominic Raab’s Tuesday tweet that he was “confident” a deal could be struck, and that Brexit negotiations would be “continuous” from now on, though they were in the final stage. Brexit negotiations resumed on Tuesday and the prospect of a “no-deal Brexit ”, when the final deadline of March 2019 for the UK exit could pass without any trade agreement ratified, is a major drag on UK economy.

Asian indices higher while US and China enforce tariffs

Asian stock indices are mostly in positive territory despite enacting of 25 percent tariffs on $16 billion worth of each other’s goods by United States and China today. Nikkei ended 0.2% higher at 22410.82 helped by continued yen slide against the dollar. China’s stocks are mixed: the Shanghai Composite Index is up 0.4% while Hong Kong’s Hang Seng Index is 0.5% lower. Australia’s All Ordinaries Index extended losses another 0.3 percentage points despite accelerated Australian dollar fall against the greenback.

Brent slips

Brent futures prices are pulling back today. Prices jumped yesterday after the Energy Information Administration reported bigger than expected decline in crude stockpile: US domestic crude supplies dropped by 5.8 million barrels last week as refining runs hold near record high when 5.2 million barrels fall was forecast. Prices ended sharply higher yesterday: October Brent crude rose 3% to $74.78 a barrel on Wednesday.

Market Analysis provided by IFCMarkets


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