The Federal Reserve’s cautiousness has sent the dollar reeling. The Fed’s backtracking to two hikes this year from four is still met with skepticism by the market. It previously had a June hike nearly discounted but has not pushed that out until September.  

With a backdrop of  BOJ, and ECB and PBOC easing policy, and the Federal Reserve reducing the number of hikes it anticipates, the recovery from the turbulent start to the year continues. Although the Nikkei slipped, the MSCI Asia-Pacific Index rose 2% to its best level since earlier January. It is up 14.5% since the February 15 low. The MSCI Emerging Market equity index’s 2.4% gain lifts the benchmark to new highs since early December. The recovery off the January low is nearly 18.25%. 

European equities are mostly higher, but the buying is less enthusiastic. Most markets are posting small gains. The Dow Jones Stoxx 600 is up fractionally. The rally in the energy, materials and utilities is offsetting the decline in health care, consumer staples, information technology and financials. 

Commodities are broadly higher.  Oil, copper, and zinc are up in excess of two percent. News that the US oil build was the smallest in five weeks, coupled with indications that an OPEC/non-OPEC meeting will take place in the middle of next month and the weaker dollar are unpinning oil prices. The ceiling on the May light sweet crude just above $40 has been convincingly breached and it is propelled to $41. The immediate target is in the $41.50 area and then $43.  

The markets have mostly responded to what is generally seen as a dovish Fed statement and forward guidance. That said, the market is even more dovish. Four things stand out to us. First, Fed officials need to see greater evidence of the US economy’s resilience to the global economic and financial developments. Second,  Fed officials are concerned that the recent acceleration of inflation is temporary.