Wall Street rose, the US dollar sold off, driving the Aussie dollar to new 8 month highs, gold and oil rose as well, and the ASX is looking at yet another positive start today as a result.
The reason for the gains – the dovish statement from the US Federal Reserve on interest rates and the reduction in the expected number of rises this year from four to two (and almost certainly one).
The Aussie dollar rose off the back of the fall in the Australian unemployment rate to 5.8% (again) in February, but the big factor was the way the US dollar fell sharply to 2016 lows against the dollar index, (which measures the greenback’s value against a basket of six major currencies), thanks to the Fed statement.
The Aussie dollar peaked at 76.57 US cents and was trading just under that level in early Asian markets this morning, adding to the pressures on the Reserve Bank to cut interest rates if the currency continues around this level for a few more months. The surge of more than 5% in the value of the currency this year is equal to a 0.25% rate rise, according to some estimates.
Wall St moved higher to push the Dow into positive territory for the year, while the S&P 500 briefly moved positive for the year, before fading.
The Dow rose 155.73 points, or 0.9%, to 17,481.49, the S&P 500 added 13.37 points, or 0.6%, to 2,040.59 and the Nasdaq added 11.02 points, or 0.2%, to 4,774.99.
That was in contrast to Europe where markets mostly fell, except London. Asian markets were mostly higher and the ASX ended up 1%, and is looking for a half a per cent rise at the opening this morning.
Commodity prices rose because of the weak US dollar, and the continuing belief that the worst was over for oil.
US crude oil futures (For West Texas Intermediate) closed above $US40 a barrel for the first time in 2016, a day after the Fed’s statement weakened the US dollar.
West Texas Intermediate crude futures for April delivery jumped $US1.74, or 4.5%, to settle at $US40.20 a barrel in New York—the highest close for a front-month contract since December 3.
In London, May Brent crude futures rose $US1.21, or 3%, to finish at $US41.54 —the highest finish since December 4. Comex gold futures bounced back in New York to end higher the U.S dollar continued to fall. Gold for April delivery jumped $US35.20, or $2.9%, to settle at $US1,265. It later eased in after hours trading to around $US1,258 an ounce.
Comex silver futures jumped 5.1% to $US16 an ounce, while Comex copper rose 2.6%, to $US2.27 an ounce.
