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The Fed Disappoints Wall Street, the Dollar Didn’t Show Relative Strength
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It was an interest rate decision day yesterday, as the Fed released its statement mentioning that even though the economy is recuperating, there are still concerns regarding consumer consumption, which derives from the employment situation. The Fed left it rates at a range of 0-0.25%, stressing that it will leave its rates at their current low level for an extended period.
The markets took the news more than lightly, erasing their intraday gains, after bouncing higher at the start of the session. Even though additional fundamental data helped to spark buying throughout the session, including a better ADP result, of -203.00k, the market lost its steam during the session. One must note that the ADP result was better that last month’s result, but came out lower than expected.
After presenting some volatility the major indices began to decline, led lower by the financial sector. The fed also mentioned that while the overall market has improved the battered financial market didn’t show signs of improvement during October. The major indices closed mixed with the S&P500 holding on to positive territory. The Nasdaq closed the session lower, down by 0.09%.
From a technical point of view, the S&P500 is still holding above it prior low, but is yet to complete its current turnaround and form a higher low.
The Dollar didn’t rise!It is important to note that despite the recent price action on the equity market the Dollar isn’t presenting relative strength. During yesterday’s session the Dollar index dropped below its 4 hour support as stocks rallied throughout the first half of the trading day. Even though the Dollar managed to gain back intraday strength, it closed the session in negative territory.
On individual pairs the EUR/USD and the GBP/USD both rallied higher. The EUR/USD formed a higher low, after bouncing off trend line support, while the GBP/USD climbed up to its recent minor trend line resistance. One must note that major resistance still lies ahead at $1.6660, a level which is currently decreasing the potential risk-reward.
Even though the pound and the Euro presented a positive session, today’s interest rate decisions will have a major affect on the individual pairs. While both banks are expected to hold at current levels, the BOE could shake the markets due to recent GDP figures. To date analysts are wondering whether the BOE will extend its purchasing program to further help the U.K’s economy. With inflation still at moderate levels and the housing market beginning to show signs of stability it will be interesting to see whether the BOE will intervene and add additional funds.
Economic Data to Watch Out For
Apart from two interest rate decisions from the BOE and ECB, the U.S is scheduled to release its Nonfarm productivity and initial jobless claims. Although today’s trading day should be characterized by dramatic moves, one must note that most investor’s will be preparing for tomorrow’s session. Similar to every first Friday of the month the U.S will release its unemployment and Nonfarm payrolls figures. According to current expectations, analysts are anticipating unemployment to reach a 26 year high.
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