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Dovish Fed trounces dollar

An easier stance from the US Federal Reserve spurred markets overnight. The US dollar fell and bonds rallied as investors contemplated lower interest rates for longer. Shares rallied initially, but comments from US president Trump that the US will not remove tariffs on goods from China soured sentiment and saw stocks finish in the red.

The Fed kept interest rates steady, but expressed concerns in the accompanying statement about risks from slowing global growth. Importantly, the Fed board’s estimate of future interest rates dropped from predicting a 0.25% rise this year to no change. The US dollar hit two month lows against the Euro and Yen.

Trade talks between Beijing and Washington continue around the clock. Trump’s comments about keeping tariffs in place to ensure Chinese compliance will likely cause offence, and may see recent positive moves unwound. The US president also claimed the talks are going well, somewhat moderating investor concerns.

Crude oil featured after the weekly inventory report showed a drawdown of 9.6 million barrels. Both Brent and West Texas crude have climbed back to levels not seen since last November, aided by the weaker dollar. Gold continues to edge higher, possibly reflecting ongoing concern as well as a more accommodative Fed.

Asia Pacific share market futures are pointing to a fall at opening today. Australian jobs numbers due this morning have the potential to shape the trading day, especially if they diverge from muted expectations of 15,000 new jobs in February.

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