Investors monitored Fed statement to assess future trajectory of rates

INR continued to trade in a narrow range, but is trading stronger today

Dipanwita Mazumdar

Economist,

Bank of Baroda  

Mumbai, November 2, 2023: Markets cheered US Fed decision on holding rates. US 10Y yield fell sharply by 20bps, while US stocks inched up. US money market is already pricing that Fed has neared its end of the rate hike cycle. However, Fed Chair’s repeated hinting of resilient domestic macros and labour market conditions keeps the door unhinged.  The recent employment data also showed a fuzzy picture with ADP employment change showed some softening and JOLTS data on the other hand, showed more than expected job openings in Oct’23. Elsewhere in Japan, government announced economic stimulus package to provide growth the desired impetus. On domestic front, CMIE data showed than India’s unemployment rate rose to its highest level in 2 years.

• Except Hong Kong and India, stock markets closed higher. Investors monitored the Fed statement to assess future trajectory of rates. Nikkei advanced the most, led by gains in gas & water and electrical stocks. US stocks too ended in green with S&P 500 advancing by 1.1%. However, Sensex declined by 0.4% as India’s manufacturing PMI dipped in Oct’23. Metal and power stocks fell the most. However, it is trading higher today, in line with other Asian stocks.
• Except JPY, other global currencies traded in tight ranges after the FOMC statement. DXY rose by 0.2% tracking comments from Fed Chair amidst weak macro data (ISM manufacturing PMI and private payrolls). JPY recovered and appreciated by 0.5%. INR continued to trade in a narrow range, but is trading stronger today. Other Asian currencies are also trading higher.   
• US 10Y yield fell at the sharpest pace by 20bps taking cues from Fed policy. This was also supported by reports of US Treasury’s plans to slow the pace of increases in long term debt sales. Germany’s 10Y yield fell by 4bps tracking softening inflation print in the Eurozone. India’s 10Y yield closed stable. It is trading at 7.33% today.

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