Europe Points Higher After Fed's Historic Shift

As the dust settles on the Federal Reserve’s historic policy shift the mood in the market is upbeat. European bourses and US futures are pointing to a stronger start.

Charts (5)

Europe Points Higher After Fed’s Historic Shift
As the dust settles on the Federal Reserve’s historic policy shift the mood in the market is upbeat. European bourses and US futures are pointing to a stronger start after a mixed finish on Wall Street overnight. Whilst the Dow & the S&P ended in positive territory, the Nasdaq closed in the red.
Asia also saw a mixed show, with the Japanese Nikkei and the yen slumping on news that Shinzo Abe will resign on health reasons.

Fed softens approach to inflation
Jerome Powell, Chair of the world’s most powerful central bank announced a shift in policy framework, paving the way for years of more pro-growth policies. 
The Fed will adopt a softer approach to inflation, allowing inflation to over run the 2% target for some time in order to boost employment and to compensate for the extended periods of time that it has run below target.
His comments weren’t unexpected. However, they still managed to create a stir in the financial markets sending the S&P to yet another all time high and dragging the US Dollar to a 27 month low versus a basket of currencies.

BoE Andrew Bailey up next
Today it is the turn of Bank of England Governor Andrew Bailey to take to the virtual stage at Jackson Hole. Investors will be looking for further clarity around negative interest rates. Earlier this month Andrew Bailey said that negative rates were in the BoE’s toolbox. However, he also said there are no plans yet to use them.
The question is whether the BoE sticks to its preferred avenue and just adds additional stimulus to bridge the fallout from the withdrawal of the Government’s job retention scheme, whilst keeping interest rates at or above 0. Or whether this will be when the central bank looks towards using negative rates?

German consumer confidence slips
German consumer confidence unexpectedly fell -1.8 in September against expectations of +1.2. Recent data from Germany has been broadly upbeat and pointing to Germany being on the road to economic recovery. Furthermore, the German government has extended the German job retention scheme beyond March 21 in a supportive mood. Still that fact that morale has fallen as coronavirus cases rise highlight concerns surrounding a second wave.
The Dax is looking to open higher, although trailing the FTSE, whilst the Euro is benefiting from the weaker USD.
Eurozone consumer confidence is keenly awaited.

Dax Chart

More from DAX

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account