Markets content with hawkish Fed cut
European markets are off to a positive start on Thursday after investors welcomed the Fed’s third consecutive rate cut, despite signalling a pause going forward.
Source – Thomson Reuters Eikon
Powell and his colleagues have clearly satisfied investors craving for cuts and eased recession fears going into 2020. The mid-cycle adjustment would appear to be over and investors are at ease with that, with no more cuts expected until this time next year.
Of course, a lot can change in that time and the US and global economy’s problems are not behind them, but this has certainly alleviated some of those pressures. If the US and China can finalize phase one of the trade agreement at the same time, we may be on a more positive trajectory.
Of course, the economy is still showing signs of softness with the third quarter GDP being just about acceptable and ADP reporting stronger than expected jobs growth. It doesn’t end there though with income, spending, inflation and the jobs report to come over the next 36 hours.
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Gold rises as dollar pulls back post-Fed cut
Gold was buoyed by the Fed’s decision despite it widely being regarded as a hawkish cut. The dollar pulled back following the decision and press conference which lifted the yellow metal. Interestingly though, it steadied below $1,500 as the consolidation continued. We’re still in this interesting middle ground for gold, whereby it appeared to breakout to the downside in late September but has since consolidated and, if anything, bullish pressures have been building.
A break above $1,520 would appear to confirm the latter but if it instead falls below $1,480, it would end the series of higher lows and could instead be the catalyst for the resumption of a broader correction lower.
Gold Daily Chart
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Oil rises on economic optimism
Oil prices have been highly correlated with economic optimism which has, in turn, been tied to the Fed and US-China trade talks. As these have moved in a more favourable direction, oil has pulled off its lows, albeit in a very cautious way.
Brent finds itself in the $60-62 range, where it has repeatedly experienced support and resistance in the past. Having rebounded off the peak earlier this week, it is now finding support around $60 and with optimism improving, it will be interesting to see if support builds.
Brent Daily Chart
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Craig Erlam
His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News.
Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
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