Overnight on Wall Street: Thursday 18 March 2021

Equity markets

US Equity pushed higher overnight with the S&P500 and Dow Jones indexes both closing at record highs. Investors were cheered by the Federal Reserve’s dovish stance on interest rates and optimistic views on the US economic recovery.

•         Dow Jones up 189 (0.58%)
•         NASDAQ up 54 (0.40%)
•         S&P 500 up 11 (0.29%)
•         Russell 2000 up 17 (0.73%)

Source: Yahoo Finance

FOMC policy meeting

Overnight we had the US Federal reserve release its economic projections and policy on interest rates going forward. While giving an optimistic outlook on the state of the US economy Fed Chairman Powell recommitted to continuing asset purchases at the current rate and keeping their easy money interest rate policy in place until the Fed’s inflation targets are met. Most Fed officials expect to hold short-term interest rates close to zero through 2023 .

With the Fed providing clarity around the central bank’s updated approach to inflation and interest rates, equity markets roared higher while the US dollar and bond yields dipped.

FX markets 

US Dollar

On Fed Chairman Powell’s comments, the US Dollar index dipped sharply with the spectre of rising rates squashed for now. All major currencies rallied strongly against the US dollar as the FX and Bond markets adjusted their near term rate expectations.

Source: GO MT4

Commodities

Gold

Gold was another beneficiary of the Fed’s commitment to easy money policies, rallying over 1.2% on US dollar weakness and the Fed’s commitment to reaching its increased inflation targets.

Gold has now been up 7 of the last 8 sessions as it continues its bounce off the 1680 support area.

Source: GO MT4