US exchanges are closed for the Juneteenth holiday, but that has not stopped traders from reacting to political and monetary developments.
Overseas markets are down in overnight trading with Hang Seng losing 2.0%, the Nikkei sliding 1.0%, the DAX dropping 0.6%, and the FTSE falling 0.4%. US index futures are down 0.4%-0.6% ahead of closing today. Meanwhile, Crude Oil is up 1.3% and the VIX has jumped back up above 20. Combined, this action suggests investors remain concerned about the potential negative impacts on the world economy from the current Middle East war and the risk of further escalation in hostilities.
Central banks have been active with the summer approaching. Yesterday afternoon, the Fed made no changes to monetary policy as expected, maintaining the Fed Funds rate and continuing to forecast two interest rate cuts this year. However, FOMC members’ economic projections screamed stagflation, as the GDP growth forecast fell and the inflation forecast rose.
The Bank of England also maintained its benchmark interest rate today, but one more dovish dissenter than expected appears to have left the door open to a potential summer rate cut. The Swiss National Bank cut its benchmark rate by 0.25% to 0.00%, as had been widely expected.
Paper currencies are quiet so far today, except for the Australian Dollar which is down 0.6% following a disappointing Australian job report (2.5K job decline vs street 25K increase). Gold is down 0.5%.