Market moves after the US Federal Reserve confirmed its accommodative stance illustrate the importance of positioning in determining reactions. Interest rate markets backed further away from expectations of a 2020 cut, but in a contrary response the US dollar slipped. Trading remains subdued ahead of tonight’s UK election.
The majority of board members of the Fed expect no interest rate cuts in 2020, with further reductions in 2021. However interest rate markets are still reflecting a 0.25% fall by the end of next year. In the past divergence between the Fed and the market usually saw the central bank come around to the traders’ point of view, but the overnight action saw the market move towards the Fed forecasts.
The weakening US dollar may weigh on Asia Pacific equity trading today. Gains for local currencies may tempt international investors to take profits across the region. Modest overnight gains in European and US stocks have futures slightly higher in green for Japan and Hong Kong, but the Australia 200 index is tipped to open down 27 points. A 1% jump in the Australian dollar overnight could be the culprit.
Big four bank Westpac faces shareholders at its AGM this morning. The bank’s response to recent charges by anti-money laundering authority Austrac are high on the agenda. The board faces an automatic spill motion if 25% of shareholders vote against its executive remuneration report for a second time.