Fed minutes make a splash! After the Fed minutes were released on Wednesday, the market rallied again, with U.S. stocks falling across the board, the dollar rebounding above the 93 mark and spot gold’s slide accelerating from $2,000 to more than $80 below 1930. Surveys show the gold market is now the second most crowded financial asset after technology stocks. While the European Central Bank minutes and preliminary U.S. data will be watched throughout the session, the U.S. and China will remain on alert for any update on their plans to reschedule trade agreement talks postponed last weekend, bloomberg said, citing people familiar with the matter.
The Fed explodes the market! At one point, gold collapsed to more than $80
The minutes of the fed’s most closely watched meeting were extraordinary, and the market quickly took off: U.S. stocks fell sharply, the dollar strengthened, gold tumbled…
Minutes from the Federal Reserve’s July 28-29 meeting, released on Wednesday, show that the U.S. economy has recovered in recent months after a sharp downturn following the COVID-19 outbreak, but remains well below levels seen before the outbreak earlier this year. At the same time, policy-makers expressed concern about risks in the financial system and concern about the soaring federal government debt.
The Fed reiterated that it would keep interest rates near zero until it saw that the economy could withstand the adverse effects of the outbreak. The Fed believes the outbreak will hit the economy hard, posing medium-term concerns for the economy, the job market and inflation.
That’s despite repeated comments by Fed Chairman Jerome Powell and other Fed officials that Banks and related institutions are generally in good shape. But FOMC members at the meeting expressed concern about whether the stability of the financial system would change if the outbreak continued to spread and “more adverse” scenarios occurred in the future.
The Fed has also ruled out more dovish monetary policy measures such as yield curve control. There was discussion of yield curve control, the minutes showed, but most saw little benefit in introducing it in the current environment because the Fed’s forward rate guidance was credible and long-term interest rates remained low.
After the release of the fed minutes, some analysts were disappointed that the minutes did not hint at an imminent easing of forward guidance and QE (quantitative easing).
“The market seems to be quite unhappy with the talk of yield curve control,” said Tom Simons, a money market economist at Jefferies.
He added that the minutes suggested that yield curve control was unlikely to be implemented this year unless there were significant changes in markets or the economy.
U.S. stocks fell sharply after the fed minutes, with all three major indexes falling. But Apple’s market capitalization topped $2 trillion.
“The Fed has been cautious in the minutes, as it has been over the past month,” said Mike O ‘Rourke, chief market strategist at Jones Trading in New York. I think the fact that the Fed is not very interested in yield curve control and extreme measures that some investors might be happy with is worrying.”
Meanwhile, the DOLLAR took advantage of the rebound, with the DOLLAR index surging more than 70 points above the 93-point mark. The U.S. dollar index gained further in intraday trading on Thursday and is now trading around 93.10.
Analysts said the dollar’s jump on Wednesday reflected profit-taking in some parts of the market and disappointment among traders who had expected a more dovish view from the Fed.
“Some in the market were expecting the Fed to be more dovish overall,” said John Doyle, vice President of trading at Tempus, Inc. I think that was one of the reasons for the sell-off in the stock market and the rise in the dollar after the minutes came out.”
“I don’t think the minutes by themselves are enough to trigger today’s move, but because of the level of technology we’re in, it’s seen as a reason to take profits,” he said.
“The dollar is breaking through some very strong resistance and we will need a strong signal from the Fed before we see the next selling pressure against the dollar,” said Edward Moya, senior market analyst at OANDA.
As the dollar continued to rally, spot gold’s slide accelerated, with gold falling more than $80 from around $2,000 to below $1930 before hovering around the 1940s in Intraday trading on Thursday.
New news on China-Us trade!
Bloomberg reported, citing a person familiar with the matter, that the US and China are considering rescheduling the first phase of a trade agreement, a plan that had been in place as early as the weekend. The talks are aimed at assessing progress made by the world’s two largest economies six months into an agreement.
While no specific date has been set, the review will take place soon, the source said. In addition to Liu he and Lighthizer, U.S. officials at the meeting included Treasury Secretary Steven Mnuchin.
Greg Gilligan, chairman of the American Chamber of Commerce in China, said low-level negotiations between the United States and China continue on a regular basis.
U.S. President Donald Trump said On Tuesday that he canceled trade talks with China over the weekend, raising questions about the future of the deal. In an increasingly tense relationship between China and the United States, the agreement is currently the most stable point.
On Aug. 13, Mr. Trump’s chief economic adviser, Larry Kudlow, said the trade deal was going well, repeating comments he made earlier in the week and saying key leaders had called to review the deal. He did not think of heightening tensions between the two countries could endanger agreement.
White House Chief of Staff Mark Meadows said Aug. 18 that the U.S. and China had not rescheduled the meeting, but THAT U.S. Trade Representative Robert Lighthizer would continue to be in contact with his Chinese counterparts.
Meadows stressed that talks between China and the United States on the implementation of the trade agreement have not been completely canceled, but postponed, and the two sides are still watching the implementation of the agreement together.
Zhao Lijian, the spokesman of the Chinese Foreign Ministry, gave no further details on the cancellation of the meeting at a regular press conference on August 19. Zhao suggested asking competent authorities for details of the china-us economic and trade agreement.