Yesterday’s FOMC minutes were dovish, with the Fed focusing on its “symmetric inflation objective”. It would be content to let inflation briefly run above their 2% target as the economy continues to recover, and does not force their hand to hike as rapidly as previously perceived.
While the probability of a 25 bp rate hike in June remained a near certainty (95%), the probabilities of future Fed rate hikes fell in response as follows (from FedWatch):
Pre minutes Post minutes
Sep 81.1% 69.7%
Dec 51.3% 39.2%
US stocks rallied on the minutes, (S&P finished +8 to 2733), the US 10-year bond yield dipped below 3%, and the DX fell below 94 to 93.95. Gold rallied, and jumped from $1289 to $1295.
Overnight, gold continued to probe higher in a range of $1292.80 - $1298.15 and faded some continued weakness in the dollar.
The DX slipped to 93.68 against some strength in the yen (110.10 – 109.32), sterling ($1.3350 - $1.3421, stronger UK Retail Sales), and the euro ($1.1690 - $1.1746).
Gold was also boosted by a continued softening in the 10-year yield (2.977%, low since 5/14), and mostly weaker global equities. The NIKKEI was off 1.1%, the SCI fell 0.5%, Eurozone shares ranged from -0.1% to +0.4%, and S&P futures were off 0.2%.
News from the Commerce Department that it started an investigation into whether automobile imports “threaten to impair the national security of the US” weighed on stocks, as did a continued decline in oil (WTI from $71.70 - $70.86, concerns that OPEC might increase...