Global stocks fall, dollar rises after the Fed decision
Global stocks declined sharply as traders reacted to the Fed interest rate decision. In Europe, the DAX index, FTSE 100, and CAC 40 indices dropped by more than 1%. The same is true in the United States where futures tied to the Dow Jones, Nasdaq 100, and the S&P 500 have also fallen sharply. In the rate decision yesterday, the Fed decided to leave its existing monetary policies unchanged in a bid to cushion the economy. In the accompanying dot plot, 13 of the 17 Fed members said that they expect the rates will remain at the current level until at least 2023.
The Japanese yen rose against the US dollar as traders reacted to the Bank of Japan interest rate decision. Like the Fed, the bank decided to leave interest rates, quantitative easing, and the yield curve control unchanged. It also said that these policies will remain for a while as the country continued its growth path. The bank also upgraded its economic forecast for the year. The yen also gained because of the continuity expected during Yoshihide Suga’s administration.
The British pound declined slightly today after the Bank of England (BOE) delivered its September rate decision. The bank decided to leave the interest rate unchanged, as most analysts polled by Reuters were expecting. The bank also left the target for its quantitative easing unchanged. But Governor Andrew Bailey signalled that the central bank was ready to do more as the country heads towards a jump in the unemployment rate.
Elsewhere, data from Eurostat showed that the headline consumer price index declined by 0.4% in August while the core CPI fell by 0.6%. In the United States, data showed that housing starts declined to 1.416 million in August from 1.492 million in the previous month. That was a 5.1% decline. In the same period, building permits decreased by 0.9% to 1.47 million. Worse, the number of Americans who filed initial jobless claims in the previous week were 860k. These numbers, together with the weak retail sales, shows that the American economy’s recovery is fading.
The EUR/USD pair declined to the important resistance level of 1.1750 and then pared back some of the losses. It is now trading at 1.1797, which is slightly below the previous white support line and the 50-day and 25-day moving averages. The pair seems to be attempting to move back to the previous ascending channel. Therefore, the pair is likely to continue rising as bulls aim for the previous support at 1.1900.
The USD/JPY declined to an intraday low of 104.65, which is the lowest it has been since July 31. On the four-hour chart, the Relative Strength Index (RSI) has dropped to the oversold level. At the same time, the price has moved below the 50-day and 100-day exponential moving averages. It has also managed to move below the important support of 105.00. The price is likely to continue falling as bears target the next support level of 104.50.
The FTSE 100 declined to an intraday low of £6,000 as traders react to the BOE and Fed interest rate decisions. On the four-hour chart, this price is slightly above the 61.8% Fibonacci retracement level. The 25-day and 50-day exponential moving averages have also made a bearish crossover. The price is also below the ascending trendline that is shown in red. Therefore, it seems like the path of least resistance for the FTSE 100 is lower.