Equities get a little taste of what to expect if the Fed turns dovish tomorrow
S&P 500 futures are up by nearly 0.3% now with European equities also surging ahead with gains following Draghi’s dovish remarks earlier. It is but a taste of what things will look like if the Fed decides to turn on the dovish charm tomorrow.
Meanwhile, euro are bond yields are being dragged lower as a result with markets starting to price in rate cuts by the central bank as early as December this year. That has also seen Treasury yields fall to session lows with 10-year yields down by 4 bps to 2.053%.
That’s leaving for a bit of indecision among major currencies with the yen still caught up near the lows for the day but which cue should it follow? Stocks or bonds? My bias tends to always be the bond market in situations like these but markets will do what it wants to do and as a trader, you have to be prepared to embrace that.