The US Federal Reserve kept interest rates on hold after its two-day meeting concluded overnight. Chairman Powell assured the world that the Fed will extend its asset purchase program if economic growth slows. The re-assurance saw the markets continue on their optimistic path, lifting shares and putting pressure on bonds and the US dollar.
Bond traders were looking for more. Many speculated in the lead-up to the meeting that the Fed would increase the average maturity of its current bond buying program, potentially moving towards a Bank of Japan style yield curve control approach. The disappointed expectations saw the US interest rate curve steepen slightly.
Data overnight skewed to the positive. Although UK inflation came in softer than forecast, French and German PMIs were stronger, and German stocks led European shares indices higher. US PMIs also showed stronger than anticipated expansion in economic activity, although retail sales for November disappointed.
Traditional forex markets were relatively calm as bitcoin grabbed traders’ attention, with a break to new all-time highs above US$20,000. The positive news spread across the crypto world, although recent star performers monero and ripple slipped back.
Futures point to a positive start to Asia Pacific share trading as most regional currencies receive a boost from the weakening US dollar. Analysts forecast that 40,000 Australian jobs were created in November, leaving the unemployment rate at 7.0% as the participation rate increased. A positive surprise could see investors adding to any opening gains when the data is released later this morning.