Financial markets see Fed’s move as positive to growth

by: Georgette Boele

Markets loved the Fed’s dovish decision. Indeed, US equities rose to a new record high. Meanwhile, bonds rallied as did emerging market currencies and growth sensitive currencies. That said, the dollar fell under heavy pressure. Indeed, EUR/USD moved higher on the news from 1.3360 to above 1.35. Dollar weakness was also seen in USD/JPY, which dropped below 98. Meanwhile, gold prices moved from 1,300 USD per ounce to above 1,360. In the meantime, other commodities also did very well. Crucially, this suggests that markets interpret the Fed’s cautious move as a positive for growth. Indeed, if markets had taken the Fed’s move as an indication that the economy is not that strong, we would have seen a completely different market reaction.