On Thursday, Asian shares, gold prices, and Japan’s Nikkei surged to all-time highs. This followed the U.S. Federal Reserve’s announcement that it would continue to reduce interest rates.
The US currency marginally declined, while traders’ forecasts of a US rate drop in June marginally increased.
In early trading, Japan’s Nikkei (.N225) increased 1.5% to reach a new high of over 40,000. The Asia-Pacific equities outside of Japan MSCI broadest index,.MIAPJ0000PUS, increased 1.6%. As bond yields decline, spot gold is projected to benefit from lower interest rates, and it recently reached a record $2,222 per ounce.
As anticipated, the Federal Reserve raised inflation projections overnight. Additionally, the Fed decided to keep U.S. rates on hold between 5.25% and 5.5%. As of December, policymakers maintained their plan to implement three 25 basis point rate cuts this year. However, there have been no changes to this plan.
According to Standard Chartered strategist Steve Englander, “the projections suggest that they expect to ease monetary policy even if (year-on-year) core inflation is running higher.”
“We and many in the market had expected a shift to two cuts in the projections because of higher recent inflation outcomes. Sticking to three cuts and implicitly raising the inflation threshold shows an eagerness to ease, in our view.”
In New York trading, U.S. Treasury yields marginally decreased while remaining stable in Asia. The most recent yields for two years were 4.59% and for ten years, 4.26%. Overnight, the S&P 500 (.SPX) reached a record closing high, while Asian trade saw gains in both U.S. and European futures.
Although pricing pressures are evident in sticky inflation readings, Fed Chair Jerome Powell told reporters that they “haven’t really changed the overall story.” He emphasized that the story remains one of inflation gradually moving down.
The yen surged from nearly multi-decade lows to 150.45 per dollar. This occurred as the dollar, which had been rising in recent days amid expectations of a more hawkish stance from the Fed, was sold against most major rivals in the foreign exchange markets.
In Asia, the euro reached a week-high of $1.0939. After unexpectedly robust jobs data squashed early policy easing speculation, the Australian currency surged to a one-week high. Consequently, investors reacted swiftly to the new economic indicators.
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