As expected the FOMC raised rates overnight and although there were some slight changes to the post meeting statement the markets have remained steady since the announcement. On the whole, the changes were probably slightly dovish but certainly not enough to make any major changes to market opinion, the removal of the word ‘accommodative’ from the statement was probably the main change that will be mentioned. In general the message has remained consistent and clear from the Fed, the economy is still heading in the right direction and gradual rate hikes are appropriate. US stocks took at bit of a hit at the end of the session and the dollar experienced some volatility after the announcement but on the whole we’re trading at very similar levels to what we’ve seen recently.
The Fed wasn’t the only central bank announcement we’ve had this morning, the RBNZ kept rates on hold as widely expected and advised that it is prepared to cut rates if growth doesn’t increase. Rates are expected to remain on hold in the land of the long white cloud until at least early 2020 and today’s announcement did nothing to dispel these expectations. Despite a recent strong GDP print, business confidence is still low in NZ and the central bank will continue to monitor data closely over the short and medium term before we see any moves in interest rates.
Given the fact the Fed delivered pretty much what the market was expecting, investors will rightly or wrongly probably turn their focus back to the issues that have been dominating market moves over the last few months and they are of course the various trade disputes that are fuelling global growth concerns. While we still lack transparency and clarification from all parties involved we will continue to see volatility across the financial markets and in the case of the US most participants expect the strong protectionist policies and rhetoric to continue into the mid-term elections.
Looking ahead to today’s trading and Asian stock markets are expected to have a mixed start to the day as the market digests the implications of the Fed’s latest meeting. It’s once again a quiet day ahead in terms of fundamental data releases with little being released to interest investors until the US session when we have the latest US Core Durable Goods and Final GDP numbers released.