CURRENCY MARKET WRAP
As of Thu Sep 20th, Singapore Time zone UTC+8
U.S. Dollar Index, +0.30%, 98.55
USDJPY, +0.25%, $108.42
EURUSD, -0.39%, $1.1029
GBPUSD, -0.24%, $1.2472
USDCAD, +0.40%, $1.3296
AUDUSD, -0.56%, $0.6827
NZDUSD, -0.56%, $0.6323
The FOMC voted 7-3 to cut the target range for the fed funds rate by 25 basis points to 1.75-2.00%, as expected, but the dissension makes people feel it was a hawkish cut. Price action leading up to the decision was muted and volatility quickly ensued after the policy directive. (1) Voting members remained divided: St. Louis Fed President Bullard preferred a 50-basis points cut, while Boston Fed President Rosengren and Kansas City Fed President George preferred no change in the fed funds rate; (2) the median projection of Fed members suggests there will be no more rate cuts in 2019 and 2020; and (3) the interest paid on excess reserve balances was lowered to 1.80% from 2.10% — which could provide some stability in the repo market after the New York Fed injected more liquidity today.
Powell said the Fed does not see a recession, is not interested in negative rates, and the repo issue has no implications for the economy or monetary policy. FedEx (FDX), meanwhile, provided a pessimistic view on the global economy. The company cut its FY20 EPS guidance due to a weakening global environment, driven by trade tensions and policy uncertainty.
U.S. Treasury yield curve saw some flattening activity following the Fed decision. The 2-yr yield increased two basis points to 1.75%, and the 10-yr yield declined three basis points to 1.79%. The U.S. Dollar Index also strengthened after the decision, increasing 0.3% to 98.55.
STOCK MARKET WRAP
S&P500, +0.03%, 3,006.73
Nasdaq, -0.11%, 8,177.39
Nikkei Futures, -0.18%, 21,960.71
The stock market closed mixed on Wednesday, as investors digested the second rate cut from the Fed this year and an earnings warning from FedEx (FDX 150.91, -22.39, -12.9%). The S&P 500 (+0.03%), Dow Jones Industrial Average (+0.1%), and Nasdaq Composite (-0.11%) finished little changed. The Russell 2000 declined 0.6%.