The U.S. Federal Reserve may not have cut interest rates at its June policy meeting, but it signaled the possibility for interest rate cuts sometime this year, and that was all traders needed to get excited. Gold prices hit five-year highs, and gold futures soared three percent to $1,397.70 per ounce on the announcement. As of 1:30 p.m. HK/SIN on Thursday, gold futures were trading at $1,384.10, down from Wednesday afternoon’s peaks, but still up 2.62 percent.
Global stock markets also rallied after the announcements. All three major U.S. benchmarks closed higher on Wednesday, and the sentiment spread into Thursday’s trading session which saw major Asian benchmarks broadly higher. The Shanghai Composite jumped 2.18 percent and the Shenzhen Composite was up 1.80 percent. Japan’s Nikkei 225 saw gains of 0.57 percent, and Hong Kong’s Hang Seng Index gained 0.81 percent.
Also boosting trader sentiment was the Bank of Japan which kept its monetary policy steady on Thursday while hinting that it may loosen its easy monetary policy later on this year. Other central banks are expected to release their own June statements later on Thursday.
Fed Policy Thoughts
The majority of Fed members cut their rate outlook for the rest of the year by around a half a percentage point, and Chairman Jerome Powell confirmed that others agree that a case for lower rates is developing. Analysts expect an interest rate cut of up to 75 basis points by the end of 2019, though this may depend on whether or not there is progress in the trade talks between the U.S. and China. Analysts saw the Fed’s announcement as more dovish than expected, a tone which sent 10-year U.S. Treasuries to their lowest rates since November 2016.
The dollar remained on the defensive after the Fed announcement, with the dollar index down 0.22 percent to 96.91 .DXY in the mid-afternoon on Thursday, after remaining fairly stable for the past few trading sessions. The greenback eased against the yen, heading lower 0.41 percent to 107.65. The British pound surged against the dollar, up 0.40 percent to $1.2689. The euro was also higher against the dollar, up 0.37 percent to $1.1265.