Yesterday, the Federal Reserve left the interest rate unchanged and maintained the current pace of asset purchases.
As usual, Fed Chair Jerome Powell did his best to calm markets. He has once again reiterated that higher inflation was transitory and also added that the economy learned how to live with the virus, although the Delta variant of coronavirus remained a threat.
Most likely, the Fed will provide more details during the Jackson Hole conference in late August, but traders bet that the current pace of asset purchases will remain unchanged in 2021, which is bullish for stocks and bearish for the U.S. dollar.
Initial Jobless Claims Declined To 400,000
U.S. has just released Initial Jobless Claims and Continuing Jobless Claims reports. Initial Jobless Claims report indicated that 400,000 Americans filed for unemployment benefits in a week. Analysts expected that Initial Jobless Claims would total 380,000, so the report was worse than expected.
U.S. has also provided second-quarter GDP Growth Rate report which indicated that GDP increased by 6.5% quarter-over-quarter compared to analyst consensus which called for growth of 8.5%.
It remains to be seen whether the disappointing GDP report will hurt stocks today as traders may stay focused on the dovish message from the Fed. Currently, S&P 500 futures are gaining some ground in premarket trading.
Gold Rallies As U.S. Dollar Declines
Gold has finally managed to get away from the $1800 level as U.S. dollar gained strong downside momentum after Fed’s comments. The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, has managed to get to the test of the support at the 92 level which was bearish for precious metals.
Silver has also enjoyed a strong rebound, and it is currently trying to settle above the resistance at $25.50.
Yesterday, gold mining stocks showed some strength, and they look ready for a strong start of today’s trading session.