In a positive turn of events, global stock markets rallied on Thursday as several central banks hinted at potential interest rate reductions.
Following the Federal Reserve’s announcement on Wednesday of foreseeing three cuts to US borrowing costs in 2024 and maintaining interest rates at a 23-year high, market sentiment improved significantly.
On Thursday, the Bank of England and the Central Bank of Norway chose to keep rates stable but hinted at possible future cuts if inflation continues to decline.
The Swiss National Bank (SNB) took a historic step by cutting rates, marking the first major central bank to do so post the global tightening cycle end, attributing this decision to the successful battle against inflation.
David Morrison, an analyst at Trade Nation, highlighted investors’ positive response to the Fed’s unexpected dovishness, with market expectations leaning towards a 25 basis point rate cut at the June meeting, illustrated by the CME’s FedWatch Tool.
The major indices in Wall Street surged following the record highs reached post the Fed’s announcements, with Frankfurt and Paris also hitting all-time peaks before experiencing slight retractions.
Meanwhile, gold soared to a fresh high of $2,220 an ounce, considering the potential impact of US rate cuts on the dollar. The euro appreciated against the dollar, but weak eurozone manufacturing data suggests the European Central Bank may align its rate adjustments with the Fed.
The SNB’s rate cut led to the Swiss franc’s depreciation against the dollar and euro.
Despite oil witnessing profit-taking after reaching a five-month peak earlier this week, market dynamics remained active.
Key global market figures as of 1340 GMT showcased a positive trend in major indices with rising values across various stock markets and Forex rates.
The trading landscape seems to be responding favorably to the central banks’ signals towards accommodating monetary policy adjustments.