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Weaker dollar at four-week low post Fed FOMC

It was another day of consolidation for the US stock market, as the S&P 500 probed its recent all-time high level of 4,194 for the third consecutive session at the start of US trading yesterday. The index reached a fresh intraday all-time high of 4,201 at the start of Federal Reserve chair Jerome Powell’s FOMC press conference, before closing lower at 4,183. 

There were no major surprises on the FOMC monetary policy outcome as the Fed has maintained is current stance of accommodative policies. The central bank didn't change the Fed funds rate at 0%-0.25% and held steady the pace of monthly bond purchases at $120bn. Fed officials acknowledged in the FOMC statement that US economic growth has picked up significantly as “indicators of economic activity and employment have strengthened”. On the other hand, in his press conference, Powell said that it was not time to start talking about tapering bond purchases and reiterated that it will take substantial further progress until Fed’s employment and inflation goals are reached. Overall, the Fed chair has continued to downplay inflation risks, despite several commodity prices such as lumber, soaring significantly in the past three months.

The US dollar has reacted negatively post FOMC, where the US Dollar Index shed -0.32% to 90.59 at the close of yesterday’s US session, a four-week low since 3 March. Since the start of Q2 from its 31 March high of 93.47, the US Dollar Index has declined by -3.09% and broken below two key support levels at 91.50 and 91.20, respectively. The odds have increased for the start of a potential multi-month impulsive down move of the US dollar against the major currencies.

Over to key US earnings reports of the two big tech firm, Apple and Facebook, where both have managed to smash expectations on their latest quarterly results. Apple’s earnings per share (EPS) came in at $1.4 above the $0.99 consensus estimate, while Facebook recorded an EPS of $3.30 versus the $2.37 consensus estimate. In the after-hours trading session, share prices of Apple and Facebook rallied by +2.36% to 136.73 and +6.15% to 326.00 respectively. Since Apple is the largest capitalised component for both the S&P 500 and Nasdaq 100, their futures prices on their E-mini contracts have soared in today’s Asia session. At this time of the writing, the S&P 500 and Nasdaq E-minis futures have gained +0.54% to 4,199 and +0.92% to 14,019 respectively.

The ongoing US dollar weakness has also triggered a positive feedback loop for several key Asian benchmark stock indices with modest gains so far: Japan’s Nikkei 225 is up +0.21%, South Korea’s KOSPI 200 (+0.20%), China’s CSI 300 (+0.20%), Hong Kong’s Hang Seng Index (+0.60%), Australia’s AXS 200 (+0.31%) and Singapore’s Straits Times Index (+0.05%).