Federal Reserve pushes S&P through 3,000 points

Traders work on the floor at the NYSE in New York

Traders work on the floor at the New York Stock Exchange in New York U.S

- 2nd cut expected in September, even after CPI and payrolls rebound.

If it happens, it will be the Fed's first cut in a decade.

USA underlying consumer prices rose by the most in almost 1½ years in June, but the jump didn't change markets' expectation for a rate cut later this month. In the 12 months through June, the core CPI climbed 2.1% after advancing 2.0% in May.

The Labor Department reported Thursday that so-called core CPI - the consumer price index excluding the volatile food and energy components - jumped 0.3% last month, the largest increase since January 2018, after four straight monthly gains of 0.1%. That saw the 12-month rate hold steady at 2.1%.

Some of the increase in core prices was likely temporary.

Giving its first 2020 forecasts in a monthly report, the Organization of the Petroleum Exporting Countries said the world would need 29.27 million barrels per day (bpd) of crude from its 14 members next year, down 1.34 million bpd from this year.

"Last night's move from the Fed is pretty convincing that they are going towards more of a risk management overview policy which is dovish", said Stephen Innes, managing partner at Vanguard Markets, adding "also dollar trading lower is a huge support for gold".

There is one area where the president, the chairman and most modern economists agree: The fear of high inflation is a thing of the past.

Above: Dollar Index shown at daily intervals.

"I don't think that would be a good idea", he said, explaining that it would leave the Fed less able to conduct monetary policy.

The Latest on Federal Reserve Chairman Jerome Powell's presentation of the Fed's semi-annual monetary report to the Senate Banking Committee. Many Fed officials historically would then support raising interest rates to forestall what was called a "wage-price spiral".

"Since then, based on incoming data and other developments, it appears that uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the USA economic outlook", Powell testified.

See live rates for the NZ-US $ below.

The minutes showed widespread concern that the economy is losing steam.

Prepared remarks by the head of the US central bank - delivered to a committee of the US Congress on Wednesday morning - may bolster expectations of an interest rate cut later in July.

This was despite last week's strong USA jobs figures and an easing of trade tensions with China.

Wall Street just got a shot in the arm from the Federal Reserve. Markets expect those figures to reveal a notable deceleration in the pace of growth for last quarter.

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In his testimony, the first installment of two days on Capitol Hill this week, Powell also downplayed a strong June jobs report and dismissed claims that the USA labor market is hot. "This doesn't suggest that the Fed is seriously contemplating the 100bp of rate cuts that financial markets are now expecting by the end of 2020".

Eurodollar contract spreads are quickly shifting back to pricing in two 25-bps rate cuts by December 2019 and a third 25-bps rate cut by June 2020; there are -44-bps discounted through December 2019 and -71-bps discounted through June 2020.

The Fed's Open Market Committee meets later this month and is expected to announce an interest rate cut. A specialist broker can deliver you an exchange rate closer to the real market rate, thereby saving you substantial quantities of currency.

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