US stocks edged higher on Wednesday as Federal Reserve left the interest rates unchanged, and indicated a more gradual increase after the tightening starts. US Treasury yields fell and the dollar weakened against major currencies. The ICE US dollar index lost 0.7%. S&P 500 and the Dow Jones Industrial Average gained 0.2%. Fed Chair Janet Yellen reiterated the commitment to raise interest rates this year depending on how the economy evolves. Acknowledging the slow start early in the year, marked by first quarter economic contraction, policy makers lowered US growth outlook for the second time this year, indicating that the gross domestic product is expected to grow between 1.8% and 2.0% in 2015, down from a March forecast of 2.3%-2.7% growth. While 15 of 17 policymakers still indicated the first rate hike should take place this year, and the interest rate forecast suggests policy makers still expect to raise rates twice this year, seven policymakers are now in favor of hiking rates only once or not at all this year.
Fed officials also see slightly lower rates at the end of 2016 and 2017 than forecast in March. Janet Yellen said at the press conference that she wanted more decisive evidence that wages would increase beyond their current subdued pace. Today at 13:30 CET, May Consumer Price Index, Initial Jobless Claims and Continuing Claims will be released in US. The tentative outlook is positive. At 15:00 CET, June Philadelphia Fed Manufacturing Index will be released. The tentative outlook is positive. At the same time, May Leading Indicators will be released.
European stocks fell on Wednesday on concerns over lack of progress in Greek debt negotiations. The Stoxx Europe 600 index fell 0.5%, with Greece’s Athex closing down 3.2%. Euro advanced despite the increased risk of Greek default, as Greece’s top negotiator Euclid Tsakalotos confirmed Athens doesn’t have enough cash to make the 1.6-billion-euro payment to the International Monetary Fund at the end of June. Today, eurozone finance ministers meet in Luxembourg, after Greek Prime Minister Alexis Tsipras on Wednesday reiterated Greece won’t agree to unacceptable creditor demands, such as pension cuts. Today at 10:00 CET, first quarter eurozone labor costs will be released. Tomorrow at 7:00 CET, May German Producer Prices will be released.The tentative outlook is positive for euro.
Nikkei fell 1.1% today, as yen strengthened after the Federal Reserve lowered the US economic growth outlook and reduced the interest rate forecast. The Bank of Japan begins a two-day meeting today, and no changes in monetary policy are expected. Tomorrow at 1:00 CET, the Monetary Policy Statement will be released. And at 4:00 CET, Governor Kuroda will give a press conference. At 5:30 CET, All Industry Activity Index will be released. The tentative outlook is positive.
Oil prices fell on Wednesday, after US Energy Information Administration reported an unexpected increase in gasoline inventories and build-up of stockpiles at the Nymex futures delivery hub in Cushing, Oklahoma. The losses were pared, as dollar weakened after the Federal Reserve indicated a slower pace of interest rate hikes later in the year.
Gold prices settled lower Wednesday, then edged higher in electronic trading after the Federal Reserve stated US economy is strong enough to support an interest rate increase by the end of the year, but also indicated that the pace of the increases may be slower.