The US Federal Reserve maintained its accommodative stance at its two-day meeting this week. The Fed sees rates at zero until at least the end of 2022, and will keep injecting stimulus funds through asset purchases. After a positive initial response market sentiment soured as traders focussed on the Fed’s warnings of further economic damage and a projection of 10% US unemployment at year end.

The US dollar slid further following confirmation of the current stimulus. The Fed’s phrasing to “at least maintain” the program implies potential for further increases in asset purchases. The Swiss Franc was the main beneficiary overnight, although the US Dollar also fell against the Euro and the Yen. Further gains for industrial metals and crude oil meant commodity currencies had two good reasons to rally.

Haven assets rose. Gold gained more than 1%, and bond yields fell back towards all-time lows. It’s clear that the flood of funds from central banks is a key driver of asset prices, regardless of the growth outlook.

Stocks had a torrid night. European shares softened ahead of the Fed announcement, and US investors followed the continental read. Major indices strengthened in response to the statement, but as analysts drilled into the full report the Fed’s caution about the outlook turned the market tide. The S&P500 and Dow both dropped into negative territory, although the Nasdaq traded to another high-tide mark, boosted by a narrow focus on FANG stocks.

Asia Pacific share futures closed the overnight session in negative territory, and a cautious start to regional trading is likely. However the recent short squeeze in local markets could see buying emerge, and a positive finish is a possibility today.