The Federal Reserve's policy meeting yesterday produced a hawkish tilt, sending the US Dollar higher and but barely denting US stock markets.
- Yesterday saw the US Federal Reserve's policy meeting which was practically unanimously expected to bring a rate cut of 0.25%. The cut was duly made as expected, but Fed Chair Jerome Powell went on to state that " a further reduction next month is not a foregone conclusion". At the time Powell said this, the CME FedWatch tool showed a 91% chance of a further Fed rate cut of 0.25% in December, but that has now fallen to 70%. This had the effect of sending stocks just a little lower, and of boosting the US Dollar. However, the moves were smaller than they might have been, as there is good news coming from the meeting between President Trump and President Xi of China.
- President Trump has publicly stated that his meeting with President I was "outstanding", and that he will be reducing the "fentanyl" tariff to 8%, and that the 57% tariff will be reduced to 47%. China has promised to begin purchases of US Soybeans, which could be interesting for the bullish rally and breakout which we have just seen in Soybeans. This news is probably holding up stock markets, with major US equity indices down only a little from recent highs, while the Chinese HSI is down slightly. It is worth noting the price charts of major US equity indices still look very bullish, and that we saw new all-time highs printed yesterday by both the S&P 500 Index and the technology-focused NASDAQ 100 Index.
- NVIDIA yesterday became the first ever company in the world with a market capitalisation of over $5 trillion. This is larger than the entire publicly traded stock market capitalisations of Germany, France, and the UK together. NVIDIA traded at a record high yesterday, well above $200 per share.
- The Bank of Japan left its interest rate on hold at its policy meeting earlier today, as was widely expected. Two board members voted for a 0.25% hike, and US Treasury Secretary Bessent seemed to criticise the Bank's dovish policy on rates. Conditions seem to be improving for a rate hike, but the political will to make a hike is lacking, which logically will lead to a continuation of the long-term bearish trend in the Yen. The Nikkei 225 Index briefly traded at a new all-time high price earlier today. The Yen is clearly weaker today.
- The Bank of Canada cut its interest rate by 0.25% yesterday at its policy meeting, as was widely expected. This had little effect on the value of the Loonie.
- In the Forex market, the New Zealand Dollar has been the strongest major currency since today's Tokyo open, while the Japanese Yen has been the weakest. The USD/JPY currency pair remains in some focus after triggering a long trade entry at most trend-following funds two weeks ago and is looking more bullish as it trades above ¥153.00. However, a bearish feature is the double top we saw recently in this same area the last two times it was tested. Nevertheless, trend traders will still want to be long here.
- Soybean futures have made a new bullish breakout to a multi-month high price, but the price action feels a bit muted, so I don't have a great deal of confidence in this trade. If Soybean futures are too big and expensive for you, you could consider the more accessible and affordable ETF SOYB if you want affordable exposure.
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