In this report, I cover the early market action from London on Thursday, August 1st, 2019. I look briefly at the precious metals, the stock market, the dollar, the bond market and the price of WTI and Brent crude oil.
Today I look at the financial markets' reaction to the Federal Reserve's decision to cut interest rates yesterday. I also look at Fed chairman Powell's performance at the press conference following the rate decision. The stock market dropped over 1% across the board, precious metals and bond yields also dropped but the Federal Reserve Note aka the dollar rallied versus other fiat currencies too.
The markets were expecting the Fed to point to more easing going forward but chairman Powell did not indicate that this would be a certainty and that is why the Dow Jones Industrial Average dropped over 300 points.
My conclusion is that the credibility of Mr Powell and the Fed is fast vanishing and that monetary policy has become a tool to keep asset markets pumped up and not to help the general economy. From yesterday's FOMC meeting to the next one on September 18th I expect a great deal of turmoil in the financial markets given that the Fed did not deliver what the markets wanted.
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