EUR/USD Quickly Approaches 1.0900 as Fed Leaves Door Open to 2015 Rate Hike

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EUR/USD crumbled to fresh 2-month lows, breaking below several support levels and quickly approaching 1.0900 as the Fed decided to leave policy unchanged but left the door open for a rate hike in December.

The Fed said it will determine if it is appropriate to raise rates “at its next meeting” after assessing progress toward its objectives of maximum employment and 2 percent inflation. The Fed also removed from the statement comments regarding global developments potentially restraining economic activity and inflation.

EUR/USD lost around 170 pips after the release and bottomed out at 1.0897 in recent dealings. At time of writing, the pair is trading at 1.0905, recording a 1.3% loss on Wednesday.

Source : FX Street

Gold Settles at 1-week High, then Falls after Fed News

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Gold futures climbed Wednesday to settle at their highest level in about a week, then turned lower in electronic trading after the Federal Reserve left interest rates unchanged but kept the door open for a rate hike at its next meeting.

Shortly after the price settlement for gold, the Fed’s policy-setting committee said it decided to keep interest rates close to zero, but also indicated in its statement that it would focus on its “next meeting” in mid-December on whether to raise rates.

Before the Fed news, gold for December delivery gained $10.30, or 0.9%, to settle at $1,176.10 an ounce on Comex. That was its highest finish since Oct. 20.

Shortly after the Fed news, however, prices fell to $1,162 an ounce in electronic trading. The stock market’s gains evaporated.

Gold has benefited from the Fed’s ultraloose monetary policy because commodities like gold don’t offer interest. Lower rates also keep moves in the U.S. dollar in check. A stronger dollar can be a drag on dollar-denominated commodities, making them more expensive for buyers using foreign currencies.

Other metals on Comex settled higher Wednesday before the Fed news, with December silver rallying 43 cents, or 2.7%, to $16.293 an ounce, January platinum tacking on $23.60, or 2.4%, to $1,012.80 and December palladium settling at $686.10 an ounce, or 1.1%. December copper ended barely higher at $2.363 a pound.

Source: MarketWatch

U.S. Equities Climb After Fed Amid Rally in Banks, Energy Shares

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U.S. stocks soared, after erasing earlier gains following the Federal Reserve’s policy meeting statement, as banks and energy companies led a rally.

Equities had advanced into the afternoon Fed statement, boosted by Apple Inc. following its better-than-expected results and by energy shares as oil surged the most in eight weeks. A signal that policy makers are still considering an interest-rate increase this year briefly undercut the gains before banks jumped on the prospects for stronger profits.

The Standard & Poor’s 500 Index rose 1.2 percent to 2,090.29 at 4 p.m. in New York, after earlier wiping out a 0.9 percent gain. The Nasdaq Composite Index increased 1.3 percent, while the Russell 2000 Index rallied 2.9 percent, its biggest gain this year.

The economy is still expanding at a “moderate” pace, Fed officials said as they left interest rates unchanged, and they will consider tightening policy at their next meeting in December without making a commitment to act this year. Even with a slower pace of recent job gains, labor market indicators show slack has diminished since early this year, the Federal Open Market Committee said.

The Fed removed a line from September’s statement saying that global economic and financial developments “may restrain economic activity somewhat,” saying only that the central bank is monitoring the international situation.

Source : Bloomberg

European Stocks Rise With Energy Shares Before Fed Rate Decision

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European stocks rose, buoyed by a rebound in energy companies, as investors awaited the outcome of a Federal Reserve meeting for indications of the trajectory of U.S. borrowing costs.

BP Plc and Royal Dutch Shell Plc added 1.5 percent or more as oil rose from a two-month low after industry data showed declines in U.S. fuel inventories and crude stockpiles at the nation’s biggest storage hub. Saipem SpA rallied 11 percent after Eni SpA agreed to sell a stake in the company to Fondo Strategico Italiano SpA. Eni rose 2.2 percent.

The Stoxx Europe 600 Index added 1.1 percent at the close of trading. All 19 industry groups rose, with oil-and-gas companies leading gains and snapping a three-day decline. Europe’s benchmark measure has climbed 8.1 percent in October, rebounding from a quarterly rout and set for its best monthly gain since 2009.

Source : Bloomberg

PBOC Done Cutting Benchmark Rates, According to Economist Survey

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China’s central bank will refrain from further benchmark interest-rate cuts and economic growth will hold steady in the fourth quarter, according to economists surveyed by Bloomberg News.

Growth in the final three months will be 6.9 percent from a year earlier, according to the median of analysts estimates in an Oct. 19-27 survey. That’s more optimistic than the 6.8 percent projected for the quarter in an earlier poll.

The People’s Bank of China will make one more cut to banks’ required reserve ratio this year but leave both the lending and deposit interest rates at current levels through to 2017, according to the survey. Policy makers lowered the benchmark rate last week for a sixth time in a year after third-quarter growth came in at the weakest rate since 2009.

“The PBOC may cut the RRR (required reserve ratio) one more time this year and increase central bank lending to make monetary policy transmission more efficient and reduce effective financing costs,” Bian Quanshui, a China economy analyst at China International Capital Corp. in Beijing, wrote in a note. “Lower real interest rates will help stabilize economic growth and prices.”

The central bank said late Friday it would cut benchmark interest rates, stepping up the battle against deflationary pressures. Policy makers also reduced the amount of deposits banks must hold as reserves, adding liquidity that’s been drained by increasing capital outflows since August’s yuan devaluation. A gauge of capital outflows compiled by Bloomberg surged to a record $194.3 billion in September.

The rate cut came just before this week’s gathering of China’s top leaders, who are gathering in Beijing to formulate the 13th five-year plan while confronting an era of sub-7 percent growth for the first time since Deng Xiaoping opened the nation to the outside world in the late 1970s. The world’s second-largest economy grew 7 percent in both of the first two quarters of this year, in line with Premier Li Keqiang’s goal, before the expansion slipped to 6.9 percent in the third quarter.

Some alternative readings suggest the growth pace is even slower. Bloomberg Intelligence economists Tom Orlik and Fielding Chen say "official numbers may be upward biased during downturns."

UBS Group AG chief China economist Wang Tao expects the PBOC will cut rates one more time this year, probably in December, and again in early 2016 to bring the lending rate to 3.85 percent and the one-year deposit rate to 1 percent.

“This would push real deposit rate into negative territory,” as has often happened in the past, Tao wrote in a report. That could “encourage consumption, support asset prices and anchor inflation expectations.”

Forecasters expect growth to decelerate to 6.5 percent in 2016 and to 6.3 percent the following year, the survey showed, down from an anticipated 6.9 percent for 2015.

“Policymakers are serious about defending the 7 percent growth target this year,” Larry Hu, head of China economics at Macquarie Securities Ltd. in Hong Kong, said in a recent note. He expects the central bank to make one more RRR cut this year while leaving the main rate unchanged.

Source: Bloomberg