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Dollar dips, stocks steady as traders brace for Fed relieving

The dollar slipped on Wednesday even as Treasury yields edged higher and worldwide stocks steadied as traders weighed the chances of a supersized Federal Reserve rate of interest cut later on in the day.

The U.S. currency dropped 0.3% against the yen to 141.92, restoring about a third of its gains from Tuesday, when unexpectedly robust U.S. retail sales information was taken as compromising the case for aggressive Fed reducing.

It likewise lost ground versus other majors, with the British pound up 0.4%.

U.S. bond yields ticked greater, however. The 2-year Treasury yield, the most sensitive to short-term rate expectations, edged up 3.4 basis indicate 3.626%, and the benchmark 10-year yield increased 4 basis points to 3.69%.

The Fed will reveal its rate choice at 2 p.m. EDT (1800. GMT).

Possibilities of the U.S. central bank starting its alleviating. cycle with a super-sized cut of 50 basis points (bps) were. restored previously this week, after media reports raised the. prospect of more aggressive action.

Financial markets are fully pricing in a 25 bps rate cut,. while the odds of a 50 bps cut stood at 63% by Wednesday,. according to LSEG information, up from as low as 14% a week ago.

We enjoy this debate - everyone's very focussed on 50 or 25. but what is important is that they interact to the market. that they mean to go neutral by next summertime, said Samy Chaar,. primary economic expert at Lombard Odier.

The worst that you can get is they go 25 and pretend that. whatever is normal and that monetary policy still needs to be. restrictive.

European stocks slipped 0.4%, with innovation and. media shares among the most significant laggards.

MSCI's index of world stocks slipped 0.1%. after having touched a two-week high a day earlier and just. below an all-time high.

Japan's Nikkei stock index climbed as much as 1.3%. in reaction to over night weak point in the yen, but pared those. gains to 0.5% as the currency rebounded.

BULL GO TO GO ON?

Wall Street completed nearly unchanged on Tuesday, stopping working to. sustain early momentum that pushed the S&P 500 and Dow Jones to. record intraday highs. S&P 500 futures indicated a. a little higher open later Wednesday.

We believe equities will prosper as the Federal Reserve. begins to ease policy versus a background of resistant financial. activity, said Daniel Grosvenor, director of equity strategy at. Oxford Economics.

However, the upside is most likely to be more modest than. previous soft-landing episodes as headline valuations are. extended, he added.

The euro edged up 0.2% to $1.1124. Sterling. rose 0.4% to $1.3210 after data showed British. inflation held constant in August, however got in the services. sector, contributing to bets in monetary markets that the Bank of. England will keep interest rates on hold on Thursday.

Traders are pricing in just a 26% probability of a 25-bp cut. from the BoE on Thursday.

Meanwhile, gold edged 0.3% higher to $2,577 per. ounce, closing in on record highs touched earlier this week.

Petroleum pulled back after getting about $1 a barrel on. Tuesday as tensions intensified in the Middle East.

U.S. crude futures decreased 0.6% to $70.63, and Brent. unrefined futures lost 0.6% to trade at $73.14.

(source: Reuters)