US Market Wrap: FOMC wording gives US dollar wings
- Japan: Industrial Production 2350 GMT
- US: Q3 GDP 1230 GMT
US data released
- EIA Crude oil stocks (Actual 3.376 million barrels, versus 4.1 million forecast)
The US dollar exploded higher, with the release of the Federal Open Market Committee minutes. The line “global developments may restrain growth” was missing from the October edition of the FOMC statement, and the euro and Australian dollar led the US dollar higher. Another tweak to the statement was that "in determining whether it will be appropriate to raise the target range”, became “in determining how long to maintain this target range". The door to a December rate hike is now wide open.
The Reserve Bank of New Zealand took the opposite direction of the FOMC. The RBNZ left the official cast rate unchanged as was widely expected, and released a statement with a dovish tilt to it. That may have taken a few players by surprise. The RBNZ is concerned that “the exchange rate has been moving higher since September, which could, if sustained, dampen tradables sector activity and medium-term inflation. This would require a lower interest rate path than would otherwise be the case”. Kiwi dollar traders took that message to heart and sold NZDUSD.
Yesterday’s crude oil rout became today’s oil rally. WTI screamed higher when the Energy Information Administration reported that US crude stocks rose 3.4 billion barrels. Normally that would be bad news but it was less than the 4.1 million barrel rise that was expected. WTI rose to $46.22/barrel from $43.06/barrel.
US equity markets had a choppy session but they all closed in the green. Obviously the Fed was wrong to worry that signalling a rate hike would be bad for equity markets.
For those wanting an idea of how a Sovereign Wealth Fund operates, Saxo Bank's Clemens Bomsdorf published a great snapshot entitled Norwegian Lessons Part 2: Oil fund by the Q3 numbers.
– Edited by Robert Ryan
Michael O'Neill is an FX consultant at IFXA Ltd. Follow Mike or post your comment below to engage with Saxo Bank's social trading platform.
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