Markets rally post-Fed as Powell calms fears

Overnight in Asia, the Chinese central bank followed the Fed’s lead and kept rates unchanged, citing concerns that tariffs are weighing on the yuan. The local market fell 0.5% in response. The Nikkei was closed for a Bank Holiday leaving the ASX as the standout performer, climbing over 1% despite a concerning jobs report.

European stock indices were lower across the board in early trading. The Swiss National Bank (SNB) cut rates by 25 basis points, as expected. The Bank of England (BOE) is also forecast to leave interest rates unchanged.

In the FX market, the US dollar was sharply higher in early trade. The Dollar Index jumped back above 103.00 as buyers returned, boosting an oversold market. The Japanese yen was also stronger overnight, as the euro and sterling backed away from recent highs. The yen was unchanged against the US dollar.

Sterling pulled back from 1.3000 against the dollar, having traded at a four-month high yesterday. Investors were trimming their exposure ahead of the BOE rate decision announcement at noon today. Meanwhile, the euro also lost ground against the dollar, pulling back below 1.09000, having hit a five-month high earlier in the week.

Gold was little changed in early trade this morning, after hitting a high of $3,057 overnight, buoyed by the Fed’s dovish tone and dollar weakness. The metal’s seven-day rally shows signs of pausing as traders start to question whether the upside momentum can continue without a pullback.

Silver edged slightly lower and appears to be losing recent upside momentum. If it continues to underperform gold, then there’s a danger that the next big move could be to the downside, rather than playing catch-up as many have anticipated.

Front-month WTI crude was hovering just above $67 per barrel in early trade, supported by risk sentiment despite a reported build in weekly inventory data. Concerns about weak Chinese demand and a global surplus continue to weigh on crude, with prices apparently rangebound between $65 and $68. Gas drifted lower, with mild weather forecasts weighing on sentiment.

Cryptos were mixed this morning after getting a lift from increased risk appetite yesterday evening. Prices stalled overnight with little to move the needle either way. For now, Bitcoin appears to be stabilising around $86,000.

The VIX fell below 20, having pulled back on rising bullish equity sentiment yesterday. This reflected a more settled mood among traders. However, the calm may prove temporary, with key central bank decisions still ahead.

• SNB and BOE rate announcements: Eyes on both central banks to see if they follow the Fed’s lead.
• Economic data: Housing, jobs, and manufacturing data from the US will add more colour to the macro picture.
• Earnings to watch: NIKE, FedEx, and Micron Technology are set to report after tonight’s close, potentially offering insight into consumer and tech sector health.

Powell certainly helped the bullish cause yesterday, and the question now is whether the momentum can carry through today. The Fed’s stance provided some relief, but Trump didn’t hold back in criticising the decision not to cut rates further. Meanwhile, the focus shifts to the BOE and SNB, with markets keen to see if they mirror the Fed’s cautious tone.

Gold’s relentless rally may be nearing a pause as momentum cools. Crude oil prices have steadied, but a retest of support around $65 can’t be ruled out. Crypto remains mixed, showing little sign of decisive moves either way. As earnings roll in and central banks take the spotlight, staying alert and nimble will be crucial to navigating today’s trading session.