What to watch for on Thursday, July 28:
The US dollar slumped on Wednesday following the US Federal Reserve’s monetary policy decision. The central bank complied with expectations and raised the main reference interest rate by 75 basis points.
Financial markets reacted to Fed Chairman Jerome Powell’s words, which shed quite a bit of light on the future of monetary policy. First of all, he said that rates have reached neutrality, so there will be no more future guidance. The rates will be decided meeting by meeting.
For most of the news conference, Powell tried to cool down recession fears, and he clearly succeeded. He pointed out that nothing works without price stability, somehow saying that keeping inflation in check is more relevant than any possible economic bump in the road.
Wall Street skyrocketed. The DJIA rose 1.43%, while the S&P500 rose 2.91%. The Nasdaq Composite was the best performer, rising 4.12%.
The US Treasury yield curve has flattened a bit, with the 10-year Treasury yield trading at 2.80% and the 2-year Treasury yield at 3%. Some progress in this regard, reflecting the temporary easing of recession concerns.
The EUR/USD pair broke above 1.0200. The market temporarily brushed aside the EU turmoil, which could soon be back in the headlines. GBP/USD traded at 1.2160 at the end of the day, while commodity currencies were the best performers. AUD/USD is trading around 0.7000, while USD/CAD fell towards 1.2800.
Safe-haven assets also beat the dollar. USD/CHF dipped as low as 0.9590, while USD/JPY fell to trade at 136.50.
Spot gold rose, now trading at $1,733 a troy ounce, while crude oil prices also benefited from risk sentiment. WTI is trading around $98.05 a barrel.
On Thursday, the preliminary estimate of its Gross Domestic Product for the second quarter will be published in the US, another volatile event that would take the action to the financial markets.
Source: Fx Street
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