It has been even busier than usual for world markets overnight and into this morning with a number of major developments rocking trading action that could continue through the day today.
Yesterday, the Fed raised interest rates as expected and talked positively about the U.S. economy. Fed members in their dot plot kept their rate forecast at three hikes for this year. Fed Chair Yellen indicates 2-4 hikes would qualify as gradual.
The U.S. dollar, however, had been pricing in four or five rate hikes this year and sold off following the meeting. I think the Fed is looking at quarterly increases while saying three to give them the flexibility to pass on a quarter if something happens like a blowup over the budget or debt ceiling or some other event.
A number of other major central banks have had the opportunity to respond to the Fed decision. The People's Bank of China followed the Fed by hiking some rates through open market operations. The Bank of Japan and Swiss National Bank both maintained their negative interest rates, the BoJ also kept its QQE program going while the SNB threatened to intervene in forex markets if needed.
Breaking news, the Bank of England maintained its current 0.25% interest rate and QE target, but there was one hawkish dissenter who voted for a 0.25% rate increase on concerns about rising inflation. The street has taken this to suggest that further rate cuts are unlikely and that the Bank of England may need to raise rates in the long term should inflation pressures build. GBP is rallying on the news while the FTSE is sliding.
There have been other market moving developments. Prior to the Fed CAD and MXN soared on a combination of rising oil prices and comments from Trump trade advisor about wanting to turn North America's three biggest countries into a manufacturing powerhouse.
After the Fed meeting focus turned to the Netherlands election. Exit polls indicated Dutch voters rejected the populist Freedom party giving it only 19 seats and putting it in a 3 way tie for second. PM Rutte's incumbent party is on track to win 31 seats, better than the 25 polls had suggested but down from 41 before the vote. While this was a setback for Euroskeptics, it wasn't a ringing endorsement of the establishment either.
All of this news has sparked big swings in the markets. The lower U.S. dollar and Dutch election result initially sparked big rallies in currencies with EUR charging ahead along with CAD, MXN, gold, GBP, JPY and CHF.
Into this morning, stock markets have taken up the baton. U.S. index futures are up 0.3% while the FTSE and Dax are up about 1.0%. The Hang Seng and Italy's FTSEMIB are up closer to 2.0%.
Energy markets remain active with WTI crude up 0.6%, gasoline up 1.0% and natural gas down 1.6% ahead of today's Natgas storage report. This could keep energy stocks active again today after pulling indices upward yesterday .
U.S. markets could see a big sorting today as traders figure out who could be the big winners and losers in President Trump's first budget request. Increased spending on military and transportation is expected to be offset by big cuts to environment, foreign aid and a number of agencies. Tax and entitlement reform are expected to be left out of the budget.
There are also a couple of individual companies that could attract attention today. Canada Goose makes its trading debut in Toronto and New York today after raising $340M through its initial public offering which was prices at $17 per share, above the expected range. Meanwhile, Oracle (NYSE:ORCL) could attract some attention after beating the street on earnings and announcing a big dividend increase overnight.