At a conference in Chicago on Tuesday, Federal Reserve Chair Jerome Powell indicated he was prepared to act in the face of escalating trade tensions between the U.S. and China, which have roiled markets.
"We are closely monitoring the implications of these developments for the USA economic outlook and, as always, we will act as appropriate to sustain the expansion with a strong labor market and inflation near our symmetric two-percent objective", he stated.
In Asia, Tokyo jumped 1.8 percent, while Taipei and Hong Kong each rose 0.3 percent.
China's Shanghai Composite was more or less flat, edging just 0.03% lower to 2,861.42, while the tech-heavy Shenzhen Composite went marginally the other way, inching up by 0.04% to 1,494.77 as government plans to conduct accounting checks on the pharmaceutical industry pulled healthcare stocks lower and offset the impact of news from across the Pacific. Some of the recent gains eased in Tuesday trading, though both two-year yields, at 1.83% and 10-year ones, at 2.10%, are below the Fed's policy rate.
On Wednesday, the Australian dollar rose 0.2 per cent to US$0.7000 as data showed growth in the Australian economy picked up only modestly in the first quarter.
Against the yen JPY=, the dollar edged down 0.02% to108.125 yen per dollar, within striking distance of a five-monthhigh of 107.845 hit during the previous session.
If the U.S. Federal Reserve cuts interest rates, the Bank of Canada will follow suit, says David Rosenberg, who also warns that the loonie will surge if it doesn't. US stocks headed broadly higher in early trading Tuesday, June 4, on Wall Street after comments from Mexico's foreign minister injected some optimism into a developing trade dispute.
GBP/USD ticked up from its overnight low of $1.2671 and is flirting with the $1.2700 area.Prices got a bump after Bank of England Governor Mark Carney said United Kingdom rates would have to rise if the economy continues to perform as the Monetary Policy Committee expects.However, the ongoing leadership race to replace outgoing Prime Minister Theresa May and the rising risk of a "no-deal" Brexit will cap gains.
Investors have been anxious that the expanding conflicts between the U.S. and some of its biggest trading partners could slow USA economic growth and stymie corporate profits. They've been dumping stocks for the past month and fleeing to safer holdings such as bonds.
In a separate interview on BTV Wednesday, Dallas Fed chief Robert Kaplan said he'd want to to see more evidence the economy is slowing before backing a rate cut. The blue-chip index closed up 512.40 points, or 2.1%, at 25,332.18.
The Russell 2000 index of small companies picked up 38.58 points, or 2.6 percent, to 1,508.56.
Still, investors don't expect the Fed to lower rates in the June meeting. But he said the anti-poverty agency foresees a potentially deeper slowdown if trade hostilities persist.
The euro is expected to gain about 4% to $1.17 by mid-2020 from around $1.127 on Wednesday.