A resilient and stubborn performance from risk assets on Friday wrapped up a buoyant week. The major price driver was undeniably the move by the Federal Reserve on Wednesday, and oil prices received additional support from Israel and Palestine, where a flare-up in tension most plausibly increased the risk premium. WTI moved $3.25/bbl higher on the week and is now $6.17/bbl above the September 10 bottom.
After the FED opened the door for risk appetite overnight on Wednesday, it did take a little while for the ever-present bulls to step through. It also took for the cash market to open and a better reading in Jobless Claims to entice continued buying taking the US bourses to record highs.
The CME FedWatch tool did not lie. The US central banks opted to lower the cost of borrowing by 0.5% to the 4.75%-5.00% range with one of the governors opting for a 0.25% decrease. The Federal Reserve has ‘greater confidence’ about inflation and sees a rough balance between achieving price stability and a healthy labour market, its two critical mandates.
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