Markets Rise Post Fed's Interest Rates Decision

London: 2 November 2023 (TraderMade): The US Federal Reserve System holds interest rates at 5.25-5.5%. Investors celebrated today as they gained confidence in the likelihood of a decrease, rather than an increase, in US interest rates.

Federal Reserve Chair Jerome Powell, while leaving the door open for a potential rate hike, appeared less resolute about the idea during his press conference. This is the second consecutive pause to keep rates at a 22-year high. Inflation is still higher than the target 2% rate, and the economy is resilient.

Despite Powell's attempt to downplay the possibility of rate cuts, he acknowledges that rates are rising as inflation cools down. If the Fed takes no action, monetary policy will effectively tighten in the coming year, even as the economy is expected to slow, increasing the risk of a recession.

The Bank of England is anticipated to keep rates steady during its meeting later on Thursday, with a probability that their tightening cycle is complete.

In the currency markets, the decline in Treasury yields modestly weakened the US dollar, while the improved risk sentiment boosted the Australian and New Zealand dollars, which had been struggling.

Market participants will also be keeping an eye on the upcoming payroll report on Friday to see if it has any impact on the current optimistic atmosphere.