What you need to know for Thursday, January 28:
Risk aversion took hold of financial markets mid-London session after ECB Governing Council member Klass Knot made explicit comments on possible future central bank policies. According to him, the central bank could decide to lower its deposit rate even further below zero if that was necessary to keep its inflation target in sight, adding that the ECB has tools to counter the appreciation of the euro if necessary.
The dollar appreciated against all of its major rivals and Wall Street crashed at the open, relented before the Federal Reserve announcement and resumed afterward. US indices ended the day with heavy losses. The top three indices lost about 2% each.
The US Federal Reserve left rates unchanged at 0% -25% bps. Purchases remain unchanged at $ 80 billion UST and $ 40 billion MB. Policymakers noted that the pace of economic activity and employment in the United States has moderated in recent months. It was a fairly subdued statement, although Chief Powell added that some developments point to a better result later in the year.
Crude oil prices rose following the release of the EIA inventory report, which showed US inventories fell by $ 9.91 million. WTI closed at 52.65, weighed down by the bitter tone of equities. Gold closed lower at $ 1,842.00 a troy ounce.
Commodity-linked currencies were the worst performers, undermined by the Wall Street crash. AUD / USD and USD / CAD are ready to extend their declines.
EUR / USD held above 1.2060, the 38.2% retracement of its November / January rally. GBP / USD is trading below 1.3700 but the downside potential appears limited. In general, it appears that the dollar is ready to extend its advance.
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