ActivTrades’ Market Analysts have prepared for LeapRate their daily commentary on traditional markets for September 19, 2019. See details below:
FOREX
With yesterday’s long-time-coming announcement of a 25 basis points rate cut and subsequent hawkish performance by Chairman Jerome Powell, the North American central bank left the markets guessing. Mr Powell’s message hinted at moderate policy moves, just enough to sustain the expansion; he said the central bank is ready to adjust policy as needed, also highlighting the fact that for now he does not foresee the need for further cuts. The Dollar climbed against other currencies, in the aftermath of the announcement, having in the meantime shaved off some of those gains. To sum it up: The Fed delivered a ‘hawkish cut’, that failed to provide the markets with a clear and decisive direction.
Ricardo Evangelista – Senior Analyst, ActivTrades
EUROPEAN SHARES
Stocks are trading higher almost everywhere on Thursday in the aftermath of the highly anticipated decision of a 25bp rate cut by the FOMC committee yesterday evening. Jerome Powell reassured investors with the new 1.75%-2% rate range. Traders welcomed the fact that the FOMC did take into account worries over slowing economic growth globally as well as lingering trade tensions into its monetary policy decision. Powell also surprisingly added this week’s money markets issues wouldn’t affect monetary policy even though the FED will keep on conducting operations as necessary to fight the current liquidity squeeze and overnight measures were effective so far.
Now the focus will shift back to the international scene with trade talks still looming and geopolitical tension surging after Saudi Arabia officially blamed Iran for Saturday’s attack on its oil facilities. Elsewhere traders will follow today’s decision on interest rate by the Band of England. While most investors don’t expect any rate cuts or hikes, Mark Carney’s tone during the post-decision press conference will be scrutinized as the 31st of October Brexit deadline looms.
The FTSE-100 keeps on trading inside its bearish short-term channel but recently identified the 7,290.0pts price level as a strong support zone for prices. The market is now heading for the upper level of the bearish channel, with 7,340.0pts in sight. A clearing of this level could prolong the current rally to 7,355.0pts and 7,375.0pts by extension.
FTSE 100 index chart
Pierre Veyret– Technical analyst, ActivTrades
Dr. Kerstin Braun, President of Stenn Group, an international provider of trade finance headquartered in the UK, comments on the BoE interest rate decision:
“As anticipated, the Bank of England kept interest rates at 0.75% and the asset purchase programme at £435bn in the face of Brexit uncertainty, signs of a global slowdown and the trade war between the US and China. It was the right decision.
“During a time of persistently low interest rates and the free movement of money across borders, central bank intervention has less and less impact. Previously, an interest rate drop would increase bank lending and provide the liquidity to jump-start the economy. Now massive amounts of capital move quickly in and out of open global markets. These volumes negate the impact of short-term interest rate changes on the real economy.
“That’s why a cut in short-term rates is unlikely to fuel business investment and manufacturing. Real economic activity is driven by long-term interest rates, which are a function of expected investor confidence.
“Uncertainty around the global economy and the impact of Brexit has killed any appetite to invest. In fact, I see the head towards zero percent rates as bad for business. Banks have no incentive to loan money, and this makes credit actually tighter for companies that want to grow.
“It’s fortunate that inflation has dropped and wages are steady, putting UK consumers in a good position – for now – to keep the economy afloat as business spending pulls back amongst Brexit and global trade uncertainty.”