Stocks Rise as Fed Considers Early End to Balance Sheet Shrinking

Fundamental analysis of Forex market

US stocks open widely higher after the Wall Street Journal reported that that the Fed is considering to weigh an earlier than expected end to the bond portfolio runoff.  Stocks were punished last month when Fed Chair Powell said the balance sheet downsizing was on automatic pilot.  The Fed also was very coy in giving specifics on when the balance sheet could end.  The report noted that a survey of financial institutions by the New York Fed could see the portfolio which is around $4 trillion right now, shrink to $3.5 trillion, higher than than prior estimates of $1.5 trillion to $3.0 trillion.  The S&P 500 is up 1.1% and the Nasdaq is higher by 1.2%.

Both European and Asian equities finished the week on a positive note, shrugging off trade war concerns and the German IFO survey which is supportive to the view that the ECB is nowhere near raising rates this year.  Risk assets were also supported by hope that US may have a stopgap solution to end the partial government shutdown.  Safe-haven currencies also fell driving both the dollar and yen lower against the high-beta currencies.

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