Stock indices drift lower after dull Fed decision

European stock indices were lower across the board this morning. The UK’s FTSE 100 traded either side of 8,800, while the German DAX pulled back further from its all-time high hit a fortnight ago.

Source: TN Trader

Investors had little to chew on following yesterday’s uneventful Fed meeting. Instead, they followed weakness across Wall Street in the wake of the Fed announcements, along with the Asian Pacific sell-off. 

Investors were also looking ahead to today’s key monetary policy updates from both the Swiss National Bank (SNB) and the Bank of England (BOE). The former cut its key interest rate to zero, as expected, while the latter is forecast to keep rates unchanged.

Asian Pacific stock indices ended the session lower, carrying over the relatively weak handoff from Wall Street and reflecting unease about the broader macro outlook. Hong Kong led the decline, falling 2%. The Shanghai Composite lost 0.8% while the Japanese Nikkei closed 1% lower. 

Investor sentiment continues to be weighed down by geopolitical uncertainty and concerns over softening global economic activity.

In Australia, unemployment data came in exactly as expected, steady at 4.1% for May. While the stability in the jobs data offered a degree of reassurance, it wasn’t enough to lift market sentiment. Investors largely shrugged off the release, keeping their focus on global central bank moves and geopolitical risks. Australia’s ASX 200 closed modestly lower.

Following the Fed’s policy announcement, the US dollar found renewed strength in early Thursday trade, extending gains across major pairs, before pulling back from overnight highs. Sterling was flat ahead of the BOE meeting.

Source: TN Trader

Investors expect the BOE to leave rates unchanged today, especially with UK inflation data showing price growth of 3.4% in May - still well above the 2% target.

Meanwhile, the Swiss franc was firmer following the SNB’s decision to cut its key Policy Rate to zero, its lowest level in three years. 

Gold prices dropped below $3,350 in early trade before recovering these losses later in the European morning session. Despite falling back below the significant $3,400 level, gold has been relatively resilient. For now, it remains above its 20, 50, and 100-day moving averages. 

Source: TN Trader

Silver fell overnight, pulling back further from recent highs above $37 per ounce. It is now closing in on $36, an area around which silver consolidated for the best part of a fortnight earlier this month. It will be interesting to see if it holds this level or retreats further as the daily MACD resets from overbought levels.

Source: TN Trader

Crude oil was firmer in early trade on Thursday. Front-month WTI traded around the $74 mark, keeping it within sight of the near five-month high hit this time last week. The move was supported by continued geopolitical friction across the Middle East.

Source: TN Trader

Natural Gas prices are beginning to flirt with breakout territory as bullish momentum continues to build. While the move higher has been gradual, the technical picture is becoming more constructive. Market participants are watching closely to see if prices can break decisively higher.

Supply conditions and seasonal factors may be contributing to the recent upside, but conviction remains weak. A confirmed breakout would mark a key shift in tone for the commodity, which has been range-bound in recent weeks.

Cryptocurrency markets saw muted action overnight. Bitcoin and other major coins were mixed this morning, with no major headlines to guide price action. Volume remained light and sentiment cautious, reflecting broader market consolidation. 

While the space remains elevated overall, the recent rally has stalled somewhat. Both Bitcoin and Ether continue to consolidate within their established trading ranges, with the latter managing to hold above the key $2,500 level.

The Volatility Index (VIX) rose 2.5% to trade just above 21.00 on the July contract, continuing its slow climb off recent lows. The move reflects a growing sense of unease among investors, particularly considering the Fed’s uneventful statement and the absence of any bold policy shift.

Market participants may also be preparing for thinner liquidity due to the US holiday, with headline risk and rate policy divergence still very much in focus. While not flashing red, the VIX is clearly back on the radar as traders add to their hedges.

The Federal Reserve delivered a relatively uneventful update. While the promise of two rate cuts in 2025 is still technically on the table, investors seemed unimpressed. Yet the US dollar found support, precious metals pulled back, and volatility edged higher.