FED effect on Markets

● Dollar steady after sharp losses following Federal Reserve's cautious stance
● S&P 500 futures just shy of record as FTSE 100 hits new peak
● Euro trades near five-week high, Bund yields jump, after Dutch reject populists
● Treasury yields nudge up after post-Fed slide
● Gold rallies in the face of lower buck and bond yields

Federal Reserve chair Janet Yellen’s pledge that the central bank’s monetary normalisation will remain gradual has helped revive the market’s animal spirits, lifting stocks, bonds and gold, but hitting the dollar.

After raising interest rates as expected by 25 basis points to 0.75-1.0 per cent late in Wednesday’s session, Ms Yellen seemed to counter fears among some investors that the mooted fiscal stimulus of the Trump administration would require the Fed to raise borrowing costs at a faster pace.

“We have plenty of time to see what happens,” she said.

The dollar and Treasury yields, which move opposite to bond prices, fell sharply in the wake of Ms Yellen’s comments — though the downward pressure is subsiding on Thursday.

Describing the Fed’s move as a “dovish hike”, analysts at Citi said: “The world is slowly moving to a new rate paradigm”.

Marc Ostwald, analyst at ADM Investor Services International, said Ms Yellen’s steady-as-we-go approach “has allowed markets to adopt a goldilocks type view of the risks from Fed policy”.

The dollar index, a measure of the buck against a basket of its peers, is 100.61, following up Wednesday’s 0.9 per cent slide with a 0.1 per cent dip.