Fed cuts by 50bps but with a less dovish outlook

Source: 123RF.

However, Fed chair Powell poured cold water on future big cuts as he forecast a further two 25bps cuts this year while also stating that the bank has no intention of returning to an ultra-low interest-rate policy.

Powell's comments, along with the fact that the 50bps was already priced into the market, have seen the dollar recover overnight. The DXY index, which had fallen to 100.60, is now back at 101.06, with the euro trading at 1.1128, the pound at 1.3220, and the yen at 142.85.

The market's focus now shifts to today's US jobless claims and existing home sales data, as well as the Bank of England's MPC decision on rates, with markets expecting no change. The Bank of Japan is also expected to keep its rate unchanged at tomorrow's meeting but with a hawkish outlook.

Today we have the Reserve Bank's MPC interest-rate decision, with markets expecting the central bank to cut by 25bps. However, there are growing calls for a 50bps cut after local inflation fell below the midpoint of the Sarb's target range and on the back of the larger Fed rate cut.

The rand is currently trading at R17.51 and is likely to remain on the front foot in the short term.

Gold firmer after falling on some profit-taking yesterday

Gold is trading back at $2,568 this morning after falling to $2,550 yesterday on profit-taking and a less dovish Fed. The yellow metal is expected to remain on the front foot as traders digest Powell's comments and upcoming US data.

Platinum and Palladium are both trading higher this morning after closing weaker on the day yesterday.

Brent crude is trading largely unchanged at $73.60 as traders sit on the sidelines for now. Traders need to assess the impact of the Fed's jumbo rate cut on markets along with ongoing demand concerns and an uptick in geopolitical tensions in the Middle East.