Fed Offers Clarity, While Trump Administration Sends Muddled Messages to Investors

Stocks broke early in the day because Trump’s comments confused some traders. These comments were on top of other mixed messages from his administration throughout the negotiations. Essentially, investors were prepared for a dovish Fed, but the news was even more dovish than they were expecting.
James Hyerczyk
Stock Chart Up

The major Asian stock indexes are trading mostly higher on Thursday after the U.S. Federal Reserve announced on Wednesday that it was keeping its benchmark interest rate unchanged, while indicating it would not raise rates in 2019. The news was a complete reversal from its policy in December, when the central bank projected two interest rate hikes for 2019.

At 01:52 GMT, Japan’s Nikkei 225 Index is trading 21608.92, up 42.07 or +0.20%. Hong Kong’s Hang Seng Index is at 29326.80, up 5.83 or +0.02% and South Korea’s KOSPI Index is trading 2198.49, up 21.39 or +0.98%. In China, the Shanghai Index is at 3090.74, up 0.10 or +0.01%. In Australia, the S&P/ASX 200 is at 6146.20, down 19.10 or -0.31%.

Fed Flips to “More Dovish”

The Fed’s benchmark interest rate is currently in a range of 2.25 percent to 2.5 percent.

Essentially, investors were prepared for a dovish Fed, but the news was even more dovish than they were expecting.

The Fed also downgraded its economic forecast and said it plans to end its program of reducing the bonds it holds on its balance sheet in six months. The Fed cut its forecast of U.S. economic growth this year to 2.1 percent, down from its previous projection of 2.3 percent and the roughly 3 percent pace of expansion in 2018.

In its policy statement, the Fed said that the job market remains “strong” but noted that “growth of economic activity has slowed” since late 2018.

Additionally, Fed Chair Jerome Powell seemed to be unfazed by the sudden change in policy. He said that despite the recent dip in economic growth that “economic fundamentals are still very strong,” adding that Fed officials “see a favorable outlook for this year.”

Powell went on to say that “We foresee some weakening, but we don’t see a recession.”

Trump Administration’s Mixed Messages

With the Fed out of the way, Asian traders are likely to shift their focus back to the U.S.-China trade negotiations. On Wednesday, U.S. equity markets were pressured early in the session before the Fed announcements after President Donald Trump said that his administration’s tariffs on Chinese imports could stay in place indefinitely until Beijing complies with a still-developing trade deal – which the president said “is coming along nicely.”

“We’re not talking about removing [tariffs], we’re talking about leaving them for a substantial period of time, because we have to make sure that if we do the deal with China that China lives by the deal,” Trump told reporters on the White House lawn as he left to visit an Ohio manufacturing plant.

Stocks broke early in the day because Trump’s comments confused some traders. These comments were on top of other mixed messages from his administration throughout the negotiations. Furthermore, on Tuesday, Bloomberg News reported that China had backed off certain concessions as it sought assurances that the U.S. would remove tariffs. However, The Wall Street Journal later reported that trade talks are in their final stages.

Don't miss a thing!

Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All

Top Promotions

Top Brokers

IMPORTANT DISCLAIMERS
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
RISK DISCLAIMER
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.
FOLLOW US