The Federal Reserve reiterated its commitment, and good news came from Congress, sending financial markets on a thrilling rollercoaster ride.
The US dollar index fluctuated and fell, spot gold rose after falling, and the S&P 500 index rose slightly, as the Federal Reserve reiterated its commitment to supporting the economy and US fiscal stimulus talks made significant progress.
Time:
2020-12-17 08:50
Wednesday (December 16), US Dollar Index oscillated and fell, spot gold fell then rose, S&P 500 index rose slightly, as the Federal Reserve reiterated its commitment to supporting the economy, and US fiscal stimulus negotiations made significant progress.
The Federal Reserve said it would buy at least $120 billion in bonds per month "until substantial progress has been made toward the Committee's maximum employment and price stability goals." The Fed refused to make any changes to the duration of its bond-buying program, but Chairman Powell said the Fed would increase asset purchases if the economic recovery slowed.
Powell added that, given interest rates
were so low, he didn't think stock prices were necessarily high.
US congressional leaders are close to reaching an agreement on a $900 billion bailout package, which includes a new round of direct payments to consumers. However, CNBC has confirmed that the plan does not include liability protection for businesses, states and localities. Politico first reported the news.
Earlier, House Speaker Pelosi, Senate Majority Leader McConnell, Senate Minority Leader Schumer and House Minority Leader McCarthy met on Tuesday to discuss the aid agreement. Treasury Secretary Mnuchin attended the talks.
McConnell said late Tuesday after the meeting: "I'm optimistic that we'll reach an understanding soon." Schumer said leaders "are making progress and hope we can reach an agreement soon."
At the end of the US market, the US dollar index fell to 90.23, down 0.27%, a significant drop from the high of 90.71 reached after the Fed's announcement, and the lowest point reached 90.13.
Wells Fargo strategist Erik Nelson said that the Fed's failure to extend the maturity of the bonds purchased or adjust the pace of bond purchases, as many had expected, gave a boost to the weak dollar. He is optimistic about the short-term outlook for the dollar and expects a moderate reversal in some major dollar pairs, such as euro against the dollar.
The S&P 500 index rose 0.2% to close at 3701.17, just slightly below its all-time closing high. The Nasdaq Composite rose 0.5% to close at 12658.19, hitting an all-time intraday high. The Dow Jones index fell 44.77 points to 30154.54, down 0.15%.
Ally Invest chief investment strategist Lindsey Bell told clients: "The stimulus plan remains a key focus for the market, as it is a necessary bridge to mass vaccination. Given expectations of a recent slowdown in economic data, market participants want to reach an agreement as soon as possible. Without an agreement, volatility could intensify."
Spot gold fluctuated sharply, plunging and surging during the Fed's rate decision and Powell's press conference.
Spot gold closed at $1864.65 an ounce, up $11.16 or 0.60%, hitting an intraday high of $1865.69 an ounce and a low of $1844.69 an ounce.
Some analysts pointed out that although optimism surrounding the US coronavirus stimulus plan and optimistic Brexit news boosted risk sentiment, the dollar turned from gains to losses after the Fed's dovish outlook was released, and gold staged a sharp V-shaped reversal.
However, gold traders remain cautious as the US Congress continues to negotiate the long-awaited economic stimulus package.
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