In the foreign exchange market, the dollar has served as a safe haven. The dollar index rebounded Friday evening from 0.78% to 97.02 points. For its part, the euro fell 0.73% to $1.1359. Bonds were also sought against the risk aversion to equity investments. Interest rates (which move in the opposite direction of bond prices) fell, with the yield on the 10-year government bond (T-Bond) falling 2 basis points to 2.79%.
Investors turned their focus on the White House, where Donald Trump has engaged a showdown with Congress to secure funding for the wall he has promised to complete between the United States and Mexico. The U.S. government witnessed a partial shutdown, namely the closing of nine US federal departments and agencies, starting at midnight on Friday evening (Washington time) as senate rejected border wall funding.
The “shutdown” comes along with another political storm, following the resignation of Defense Minister James Mattis on Thursday night because of a disagreement with President Trump over his decision to withdraw from Syria partial withdrawal from Afghanistan.
The political drama made us forget the rather accommodating statements of a Fed official in the morning, who contributed to the attempt to rebound the dollar and the U.S. stocks. John Williams, the president of the New York Fed, said on CNBC television that the central bank was “ready to reassess and re-evaluate our views and our policy stance.”
The Fed is willing to review its policy if necessary, and look for market signals about the risk of economic performance below expectations, said John Williams. The Fed is now considering two rate hikes in 2019, instead of three, according to its latest economic projections on Wednesday.
There were also figures on economic growth in the United States that came slightly lower than expected, while orders for durable goods rose faster than anticipated. Furthermore, consumer spending and confidence in the US increased.