Dollar Hits One-Year Lows as Fed Rate Cuts Loom

The US dollar has fallen to one-year lows against the euro and sterling as traders anticipate significant Fed rate cuts. The Bank of Korea hints at a rate cut in October, while Bank Indonesia plans cuts in the fourth quarter. Brent crude remains near the year's low at $76.11 per barrel amid concerns over weakening global demand.

Equities

The FTSE 100 inched up 0.1% on Wednesday, as cautious trading persisted ahead of the Federal Reserve's July meeting minutes and upcoming speeches from key policymakers. This followed a sharp decline on Tuesday, marking its worst performance since 5th August. Meanwhile, the mid-cap FTSE 250 index rose by 1%, buoyed by positive earnings reports and a stable pound, which remained near a one-year high against the dollar. The chemicals sector led the way, with Elementis shares jumping 4.4% after Barclays upgraded the stock to "overweight" and raised its price target. The beverages sector also saw gains, with Diageo rising 2%, alongside similar gains in European peers Pernod Ricard and Remy Cointreau. On the downside, the pharmaceutical and biotech sectors declined by 0.5%, and oil and gas stocks slipped 0.3% as crude prices fell.

In individual stock performances, Mobico surged by 17.7% after reporting a more than 28% increase in first-half profits, signalling strong business momentum. In contrast, Watkin Jones plunged 32.8% following disappointing profit results and a subsequent downgrade from "buy" to "hold" by Peel Hunt, as the company announced a review of its funding options.

In the US, the Dow Jones Industrial Average rose 0.13% to 40,889, while the S&P 500 gained 0.42% to 5,620, and the Nasdaq Composite climbed 0.57% to 17,918. These modest gains were underpinned by investor anticipation of upcoming interest rate cuts, with the Fed widely expected to start easing monetary policy in September. US Treasury yields declined, with the 10-year yield falling to 3.795% and the 2-year yield dropping to 3.9305%, reflecting market confidence in the Fed's dovish stance.

Forex & Commodities

The US dollar continued to decline, trading near its lowest levels in over a year against the euro and sterling, as expectations for Federal Reserve rate cuts solidified. The dollar index hovered around 101.19, after dipping to 100.92, its lowest point this year. The euro eased slightly to $1.1143, after hitting $1.11735, its highest level since July 2023. Sterling slipped to $1.3084, retreating from a peak of $1.31195.

Gold prices remained near record highs, trading at $2,516.01 per ounce, buoyed by the Fed's dovish stance, with US gold futures settling at $2,547.50. Palladium also surged to over $951.00, its highest in a month, helped by increased demand for catalytic converters after Ford announced delays in its electric vehicle plans.

Oil prices fell, with Brent crude down $1.15 to $76.05 per barrel and US crude slipping $1.24 to $71.93 per barrel. This drop followed a significant downward revision in US job data, which raised concerns about economic growth.