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Markets Turn Their Back On The Negatives To Continue Rebound Ahead Of Fed Minutes

Published 22/08/2019, 06:18
Updated 21/10/2020, 09:15

Wednesday turned into another optimistic session for the US and European indices, who appear to be putting all their eggs in a central bank basket.

There, arguably, is plenty of reason for markets to be in the red. Donald Trump keeps poking the Beijing bear, stating that he is determined to ‘take China on’ regardless of whether the short term impact is good or bad for America. The Italian political situation is yet to be resolved (even if President Sergio Mattarella has begun talks with the country’s political parties). And, let’s not forget, the economic situation globally remains troubling.

However, ahead of this evening’s potentially crucial Fed meeting minutes, investors barrelled back into the Western indices, increasingly confident that central banks will step in to try and avert a recession. The CME Group’s FedWatch tool has Jerome Powell – who came in for another attack by Trump this Wednesday – and his colleagues at a 98.1% likelihood of cutting rates again in September, a number that in and of itself helps explain the market’s performance this afternoon.

The Dow Jones crossed 26175 as it added more than 200 points, while the DAX and CAC rose 1.1% and 1.6% respectively. The FTSE snuck back above 7200, striking a one-week peak as it reclaimed 80 or so points.

Not doing so good was the pound. With the relationship between the UK and EU seemingly at a Johnsonian low, sterling fell 0.4% against both the dollar and the euro, wiping away the gains seen following Angela Merkel’s comments about a ‘practical’ solution to the Irish backstop on Tuesday.

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