Market Briefing: Global markets steady ahead of Fed rate policy meeting

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Vrasidas Neofytou
Head of Investment Research

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Market Briefing: Global markets steady ahead of Fed rate policy meeting

Global financial markets were little changed on Wednesday morning, as investors await the upcoming Federal Reserve interest rate decision, while Congress lawmakers continue their debate over the next coronavirus-related fiscal rescue package.

Coronavirus Update:

The following data was compiled by Johns Hopkins University:
Global cases: More than 16.6 million
Global deaths: At least 658,914
Top five countries: United States (over 4.3 million), Brazil (over 2.4 million), India (over 1.4 million), Russia (over 822,000), South Africa (over 459,000)

Market Reaction:

US stock index futures edged higher by 0.30%, with the Dow Jones index implying an opening near 26.450 points and the Nasdaq Composite at 10.600, while the European indices were also flat.

Fig.01: Dow Jones index, Daily chart

Federal Reserve Policy Meeting:

The Federal Reserve will end its two-day policy meeting on Wednesday night, releasing a statement at 21:00 GMT+3, while its chairman Mr. Jerome Powell will host a press conference at 21:30 GMT+3.

Given the worries about the record spike of COVID-19 infection cases in some US states and the gloomy outlook for the US economy, investors expect the Federal Reserve to continue with its dovish policy stance, keeping interest rates near zero for a longer time while increasing its purchases of long term debt.

Meanwhile, the Fed extended most of its emergency lending programs by three months during its first day of the meeting yesterday, in response to the weaker-than expected US economy.

Forex Market:

The DXY-dollar index, against a basket of major currencies fell to 93.30, reaching a fresh 2-year low. The greenback lost more than 10% since March, due to the dovish policy from the Federal Reserve and the massive fiscal rescue packages from Trump’s administration to support the US economy.

Fig.02: DXY-dollar’s index, Daily chart

Furthermore, the US dollar was pressured after the resurgence of new virus cases in Florida and California, coupled with the further deterioration in the relationship between US and China, fading the hopes for a quicker economic recovery.

Economic Calendar for July 29, 2020 (GMT+ 3:00):

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