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Market mood improved as Fed policymakers discussed slowing rate hikes


US stocks advanced higher on Wednesday, preserving their upside momentum and ended the session higher after the Federal Reserve’s latest meeting minutes showed most officials backing slowing the pace of interest-rate hikes soon. Investors’ market mood improved as the Federal Reserve (Fed) officials discussed the need of slowing down the interest rate hikes.

The US FOMC Meeting Minutes showed that most participants agreed that a slower pace of interest rate hikes would be appropriate soon despite the risk of the inflation outlook remaining skewed to the upside. Most Fed officials also believe the monetary policy is approaching a sufficiently restrictive level. On the economic data front, the US Manufacturing PMI for November eased to 47.6 from 50.0 expected and 50.4 and the Services PMI declined to 46.1 compared to 47.9 market forecasts.

On the Eurozone front, the German Services PMI came to 46.4 and the Manufacturing PMI improved to 46.7. The November PMIs report showed that the Euro Area economy remains in contraction territory, although the figures beat the market expectations.

The benchmarks, S&P 500 and Dow Jones Industrial Average both advanced higher on Wednesday as the S&P 500 notched gains for a second straight session as several Fed officials backed the need to moderate the pace of rate hikes. The S&P 500 was up 0.6% on a daily basis and the Dow Jones Industrial Average climbed higher with a 0.3% gain for the day. Ten out of eleven sectors in the S&P 500 stayed in positive territory as the Consumer Discretionary sector and the Communication Services sector are the best performing among all groups, rising 1.33% and 1.21%, respectively. The Nasdaq 100 meanwhile advanced the most with a 1.0% gain on Wednesday and the MSCI World index was up 1.1% for the day.

Main Pairs Movement

The US dollar declined sharply on Wednesday, coming under pressure and finished the day down against all of its major rivals amid poor growth-related data and dovish US FOMC Meeting Minutes. The greenback marked the biggest daily slump in two weeks as the Fed officials discussed the need of slowing down the interest rate hikes. Chances of a 50 bps hike rose to 79% following the release while the terminal rate is now seen at 5.03%.

GBP/USD surged higher on Wednesday with a 1.42% gain as the cable rallied back above the 1.2000 mark after the release of mixed economic data from the US. On the UK front, the UK S&P Global PMIs were better than anticipated but signal persistent economic contraction in the country. Meanwhile, EUR/USD maintained its bullish tone and traded near the 1.0410 level following the release of the FOMC Meeting Minutes and a weaker US dollar across the board. The pair was up almost 0.90% for the day.

Gold advanced slightly with a 0.54% gain for the day after extending its rally towards the $1752 area during the US trading session, as the dovish Federal Reserve Minutes helped the precious metal to find demand. Meanwhile, WTI Oil holds lower ground at a weekly low after the biggest daily fall in two months. Oil price remains bearish around the $77.50 area.

Economic Data

CurrencyDataTime (GMT + 8)Forecast
EURGerman Ifo Business Climate Index (Nov)17:0085.0
EURECB Publishes Account of Monetary Policy Meeting20:30