Daily summary: The Fed holds rates near zero and sees stronger economic rebound

8:15 PM 16 September 2020

On the Fed decision day moods on stock markets remained mixed. European equities finished the session near yesterday’s close prices. DAX added 0.29% while CAC 40 rose 0.13%. On the other hand, FTSE 100 finished the session 0.44% below the flatline. U.S. markes opened higher will all major indices rising. American investors were waiting for the the most important event of the day - FOMC decision announcement.

Just as expected, the FOMC left rates unchanged (even though the vote was 8-2) and sees rates near zero through 2023. The Fed is going to stay on hold until inflation reaches 2% and employment achieves its maximum levels. Central bank is set to continue Treasury and MBS purchases at current pace. What might be crucial is that Fed updated its macroeconomic projections and now expects stronger economic rebound. Shortly after the announcement, risk assets advanced.

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Apart from the FOMC announcement, today investors have witnessed some key macro events. Most importantly U.S. retail sales figures came in slightly below expectations (0.6% MoM vs exp. 1.0% MoM) while last month’s results were revised lower. Oil traders got to know EIA’s set of data which could have been surprising as crude oil inventories unexpectedly declined (markets anticipated inventories build-up). British CPI declined 0.4% MoM in August (vs exp. -0.6% MoM) while CPI from Canada amounted to -0.1% MoM (vs exp. 0.1% MoM).

Tomorrow New Zealand will release its Q2 GDP report (at night BST time). Australia will publish some key labour market data. However, markets will likely focus on two monetary policy announcements: from Bank of Japan and Bank of England. As usual investors will also pay attention to U.S. jobless claims as well as Philadelphia Fed Manufacturing Index.

US500 seesawed around 3,415 pts on the Fed decision day. Shortly after the monetary policy announcement, the index caught a bid, but later US500 started to plunge (during Powell’s press conference). Source: xStation5

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