A lowering of growth and inflation targets by the Federal Reserve caused a meltdown in the US dollar on Wednesday sending US stocks sharply higher. A bounce back in the US dollar overnight is expected to send US stocks lower on the open of trading on Thursday. Showing sensitivity to the possible reaction of stock and bond markets to its statement, the Fed chose to offset the removal of forward guidance by pushing out the dots on the “dot plot” to suggest a slower pace of rate increases once they do start. As stocks and bonds rallied, something had to give and that something was the US dollar. The dollar plummeted; sending currencies such as the euro and British pound and numerous commodities including oil and gold soaring. The dollar has strengthened again overnight but an extra level of determination will be needed to push major currencies and commodities to new lows given the size of the moves seen yesterday. Should the overnight strength in the USD start to melt away again, stocks have the opportunity to extend gains. With expectations now pushed out to October for a US rate hike and a possible stabilisation of the US dollar on the cards, US stocks could have room to run on the upside. Particularly in the light of the returns that have been seen so far in Europe this year, US stocks may have some catching-up to do. Starbucks has announced a stock split. Target shares went against the grain on news they are following suit from Wal-Mart and raising their minimum wage to $9 per hour. Sports apparel brand Nike reports earnings on Thursday. Futures suggest the: S&P 500 will open 2 points lower at 2,097 with the Dow Jones expected to open 24 points lower at 18,052 and the Nasdaq 100 1 point higher at 4,423. CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
Bounce back in the US dollar to cause lower US stock market open
20:00, 18 March 2015