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Crude oil pulled back from monthly highs, falling less than 1%, with the WTI ending around $79.00. Gold rose after the FOMC meeting but failed to consolidate above $1,975. Silver also climbed but pulled back after testing levels above $25.00.
Market participants will continue to digest the FOMC meeting during the Asian session. Economic data due On Thursday includes the Export and Import Price Index in Australia. Later in the day, the ECB is expected to raise interest rates by 25 basis points. Additionally, key economic data from the US is due, including the preliminary Q2 GDP growth.
Key Developments
The US central bank raised its key interest rates by 25 basis points to 5.25%-5.5%, as expected. The rate reached levels not seen in more than 11 years. The decision and the statement offered no surprises. Chair Powell mentioned that the June inflation Consumer Price Index was welcomed but “was only one month’s report.” He added that if data suggests more hikes are needed, “that is the judgment we’ll make.”
The US dollar weakened modestly after Fed and Powell’s statements, and US yields pulled back moderately. The Dow Jones Industrial Average dropped 0.25%, ending at 101.00. The 10-year Treasury yield settled at 3.87%, and the 2-year at 4.85%. Economic data will focus on preliminary Q2 GDP, inflation indicators, Jobless Claims, and Durable Goods Orders. EUR/USD rose after falling six consecutive days, supported by a weaker US Dollar. The ECB will announce its monetary policy decision on Thursday, with a rate hike expected and a focus on language.
GBP/USD rose for the second day in a row, holding firm above 1.2900, while EUR/GBP remains subdued, hovering around 0.8560. USD/CHF lost ground for the second day, reaching weekly lows under 0.8600.
Price pressure in Switzerland has eased somewhat recently. Nevertheless, the SNB remains concerned about second-round effects. It is therefore likely to remain hawkish for the time being, favouring a strong franc. We have therefore adjusted our forecast slightly. However, we still see a moderately weaker franc in the course of the year since price pressure should ease and the SNB should increasingly tolerate a weaker franc.
AUD/USD weakened during the Asian session due to softer-than-expected inflation data from Australia. NZD/USD remained flat, hitting multi-day highs at 0.6235 before pulling back. USD/CAD remains in a range below the 20-day SMA at 1.3230 and 1.3150.
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