The Fed made a hawkish surprise! The bank would start a discussion about scaling back bond purchases. Besides, it is likely to make two interest-rate increases by the end of 2023 (sooner than expected)!
What drives the market today?
Here’s what’s moving the market on April 27.
Japanese yen surged after BOJ’s monetary stimulus
The BOJ claimed that it will buy the unlimited amount of government bonds. The central bank also will boost purchases of corporate bonds and commercial paper. The BOJ took the same measures as other countries did to support the national economy amid the corona crisis. The BOJ targeted short-term interest rates at -0.1% and 10-year bond yields around 0%. The central bank also made the GDP forecast for 2020 to fall by 3.0 to 5.0 %. Surprisingly, the Japanese yen surged maybe because the BOJ decision was expected by investors or the reason was that oil price dropped.
WTI and Brent oil prices declined to 14.3 and 20 respectively. Nothing’s changed, all oil storages are full and nobody still doesn’t need it.
AUD and NZD rose as restrictions eased
European countries such as Italy, Spain, France and Germany have taken first little steps to ease restrictions and to reopen their economies. This optimism raised the risk appetite. Also, the Covidsafe app was launched in Australia. This app will help to trace people who have been in contact with coronavirus. It should help to battle with the coronavirus more efficiently. Also, Australia is closely linked to fast-recovering China. All these factors have helped aussie and also kiwi to gain.
Goldman foresees dark future for stocks
According to Goldman Sachs, the narrow breadth in S&P 500 signals future market drawdowns. Market breadth is a ratio that compares the total number of rising stocks to the total number of falling stocks. The opinion is based on the previous data as the breadth narrowed ahead of the recessions in 1990 and 2008 and during the economic slowdowns of 2011 and 2016. The investors concern that only 5 companies made 20% of the market capitalization and less than half members of S&P 500 were trading above their 50-day moving average, according to Bloomberg.
The Federal Reserve will release its statement and announce its interest rate decision at 21:00 MT time. Then, at 21:30 MT time, the central bank will hold a press conference.
Bitcoin has broken above $41,000 for the first time since late May. Follow US Retail Sales at 15:30 MT time!
The Bank of England will release its statement and announce its monetary policy decision at 14:00 MT.
Last week the USD soared versus other major currencies, while gold headed for the biggest weekly loss in 15 months. Let’s see what new moves await us this week!
The US dollar has surged to levels unseen since April after the Fed's decision back on Wednesday. Gold has reversed up from the local dips. Still, this week was the worst for gold in more than a year.