While the Dollar traded with a lot volatility at the time of the announcement of the rate hike of 25 basis points by the US Federal Reserve Bank, the movement did not yield to an immediate change in currency rates. Only later on Thursday morning at the start of the European trading session markets moved in favour of the dollar, given the now even higher interest rate disparity between Europe and the US.
Oil traded only marginally higher with the market barely noticing the crude oil stockpile statistic from the EIA with a reported inventory buildup by 1.9 million barrels.
Equity futures indices overall started the trading session on Thursday mostly lower. While Asian indices such as the Hang Seng Index (Hong Kong 50) or the Nikkei (Japan 225) initially saw an upside, later the numbers were in the red again.
Cryptocurrency markets seemed to further calm down, as even the as of last week highly volatile Ripple stabilized on Thursday above the $0.51 level. One of the best performing cryptocurrencies was the Bitcoin fork Bitcoin Cash, which gained around 20% after Bitmain, which is one of the biggest cryptocurrency miners in the world filed for an IPO at the Hong Kong Stock Exchange.
For Thursday several important data releases are expected, such as the ISAE Consumer Confidence Survey and Producer Price Index (PPI) from Italy, Consumer Price Index (CPI) from Germany and the European Commission’s surveys on Economic Sentiment, Consumer Confidence and Industrial Confidence. In the US several important economic statistics, such as Gross Domestic Product (GDP), Durable Goods New Orders and Jobless New Claims will be released.
In South Africa the Producer Price Index for August will be released and in Mexico Trade Balance data becomes available.
In the Asian-Pacific trading session on Friday Japan releases Unemployment Rate, Retail Sales and Industrial Production data, followed by Purchasing Managers Index data from China.
While the decision to proceed with a rate hike by the US Federal Reserve on Wednesday had only limited impact on the currency market, besides an increase on volatility, a strong move followed on Thursday morning giving the dollar a sizable upside. Analysts now even more confidently expect interest rates to be increased again in December. Expectations for 2019 are currently at three or more rate hikes and one for 2020. Given the current rate now at 2.25% at the Federal Reserve Bank, this would bring interest rates up to 3.5 in 2020, while the Euro interest rate is set to remain at least until 2019 unchanged at 0%.
For Thursday even more data releases are expected with the ISAE Consumer Confidence Survey and Producer Price Index (PPI) from Italy, Consumer Price Index (CPI) from Germany and the European Commission’s surveys on Economic Sentiment, Consumer Confidence and Industrial Confidence.
Gold
Gold prices fell to the lowest level in two weeks after the Federal Reserve as expected increased interest rates. The low demand for safe haven assets for the time being and the dollar strengthened by the rising spread in interest rates put gold prices under pressure. While 10 Year US Treasury Notes yielded lower, the question will be what the longer term move in that market will be, given the Fed’s commitment for more rate hikes. Higher interest rates on other safe haven assets, such as US government bonds, make at least in theory gold less interesting for investors, as it does not bear any interest.
Key data about the US economy, such as the Gross Domestic Product (GDP), Pending Home Sales and Federal Reserve Bank are expected for Thursday, as well as Personal Income, Consumer Spending and core PCE Price Index on Friday.
WTI Oil
Oil prices continued to move higher as market analysts see uncertainty in the market regarding how the shortfall in terms of global supplies from Iran will affect the market, as in only a little more than a month, US sanctions against the Iranian oil sectors and anyone conducting business there are set to kick in.
Despite many analysts expecting a draw to be reported by the Energy Information Agency, the market showed very limited movement on the data release indicating a build of 1.9 million barrels. This comes after the American Petroleum Institute reported earlier a build of 2.9 million barrels of crude oil. The
In other news it was reported that Libya is talking to international investors to try to increase production from the current 1.3 million barrels per day to above 2 million barrels per day by 2022.
On Friday the US Baker Hughes Oil Rig Count will be released, indicating the quantity of operating oil rigs.
US 500
US equity indices traded again mixed, however the S&P 500 (US 500) future now closed for the fourth consecutive trading day lower. Especially bank (US Banks ETF -1.79%) and financial companies’ (US Financials ETF -1.24%) after the US Federal Reserve raised interest rates to 2.25% and markets are even more confident now expecting another rate hike for December.
IBM (NYSE:IBM) (+1.87%) stocks surged higher to the highest level since April, after some analysts raised the target for the company and IBM introduced several targeted ‘Watson’ Artificial Intelligence applications, which are expected also to contribute hundreds of millions to the company’s revenue next year.
Netflix (NASDAQ:NFLX) (+2.42%) again closed higher, after analysts raised their expectations for the stock’s performance, given among other factors its strong user growth, which is now in the millions per quarter globally.
On Thursday in the US several important economic statistics, such as Gross Domestic Product (GDP), Durable Goods New Orders and Jobless New Claims will be released.
