US stocks rally on hopes of a more dovish Fed, driven by US Treasury Secretary's jawboning. The US dollar weakens, while the yen and sterling outperform. Asian stocks see profit-taking.
Dow Jones outperformed, Yen strengthens, Nikkei 225 retreats, WTI crude stays weak
The US stock market continued its bullish run on Wednesday, 13 August, fuelled by hopes of a more dovish Fed heading into the third and fourth quarters of 2025, reinforced by the US Treasury Secretary Bessent’s suggestion on the US Federal Reserve to cut interest rates by 150 basis points (bps) or more, starting with 50 bps in the upcoming September FOMC meeting, over a prime time television interview.
The jawboning by a key US White House official, the US Treasury Secretary, on the Fed’s monetary policy, allowed the prior laggards, Dow Jones Industrial Average (1%) and small-caps Russell 2000 (2%), to outperform the S&P 500 (0.3%), and Nasdaq 100 (almost unchanged) yesterday. The DJIA is now just 0.3% away from its current all-time high of 45,074 printed in early December 2024, ex-post US presidential election.
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Based on the latest data from the CME FedWatch tool, the Fed Funds futures market has now started to price in a possibility of a 52% chance for a third Fed rate cut of 25 bps to occur on the last FOMC meeting of 2025 on 12 December to bring the Fed funds rate lower to 3.75%-3.5%, up from an earlier expectation of 2 rate cuts before Bessent’s media interview.
This latest dovish pricing by the Fed Funds rate futures market has reinforced the ongoing US dollar weakness. The US Dollar Index has extended its losses on Wednesday, 13 August, shedding -0.3% and breaking below its 50-day moving average.
The sterling was the top major currency performer against the greenback yesterday as the GBP/USD (0.6%) surged to a 4-week high ahead of today’s UK preliminary Q2 GDP data release.
In today’s Asia session, the star-performing major currency is the prior laggard, Japanese yen, as it staged an intraday rally of 0.6% against the greenback at this time of writing.
Today’s emergence of Japanese yen strength has also reinforced the profit-taking activities seen in the Nikkei 225 (-1.3%) after six consecutive sessions of gains that saw a new all-time high.
Hong Kong’s Hang Seng Index and Singapore’s Straits Times Index have also succumbed to profit-taking as both recorded intraday losses of -0.4% and -0.2% respectively. The exception is Australia’s ASX 200 with an intraday gain of 0.5%.
WTI crude oil extended its decline yesterday by -0.6% to close at a two-month low of US$62.19 per barrel, with markets now awaiting the 15 August meeting between US President Trump and President Putin to discuss a potential ceasefire in the Russia-Ukraine conflict. WTI crude has inched higher today by 0.4% but is still trading below a key short-term resistance level at US$63.85/barrel.
Our YouTube video above contains the latest intraday technical analysis on the latest intraday technical analysis on US Wall Street 30, US Nas 100, US SPX 500, Hong Kong 33, Japan 225, Germany 30, EUR/USD, GBP/USD, AUD/USD, USD/JPY, Gold (XAU/USD), and West Texas Oil.
