The Dollar took another step higher on Wednesday in anticipation of the FOMC minutes for the September meeting. In the end there was nothing thrilling about the report; most members agreed with the half percentage cut. The overall message reaffirmed that the initial rate cut would not dictate future interest rate decisions and that economic data would be the main policy driver going forward.
US indices had a good day on Wednesday. The Dow Jones and S&P 500 both hit record daily closes, after climbing 1% and 0.7% respectively. The Nasdaq Composite still has some catching up to do before it starts breaking its own all-time highs but enjoyed a 0.6% gain on the day nonetheless.
Unfortunately, economic data put a swift end to festivities during the following session. Yesterday’s CPI figures revealed an unexpected increase in inflation levels in the US. Both the headline and core inflation rates came in 0.1% higher than forecasts predicted. Many commentators are calling it a blip as opposed to anything more sinister, but worth keeping an eye on. In a separate report, US jobless claims also printed higher than anticipated, at 258k new claims compared to just 225k the week prior. Difficult to say whether the data are indicative of structural weakness or if they are merely a seasonal upset; either way the next Fed decision is still four weeks away so conditions have ample time to evolve. Current rate cut odds now stand at 85% for a 25 bps trim and 15% for keeping rates flat.
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