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Following the Fed’s decision on monetary policy, Wall Street finished lower after a turbulent session. The US Federal Reserve lifted rates by 25 basis points as predicted. When the Federal Reserve strikes a balance between rising inflation and banking instability, the tightening cycle is about to come to an end. Following the news, stocks surged, but soon began to decline and reverse course, supported by remarks made by US Treasury Secretary Janet Yellen. She claimed that “blanket insurance” for bank deposits is not being considered.
On Wednesday, US yields decreased, with the 10-year yield dropping to 3.43% and the 2-year yield to 3.92%. The US Dollar Index dropped 0.65% and fell for the sixth day in a row. Despite hitting weekly lows versus most of its competitors, the dollar finished far above the lows, showing some encouraging indications. The degree of volatility across the FX board will probably remain high, with the potential to either spark a broad-based recovery or drive the Dollar to new lows.
Due to the drop in US yields, the Japanese Yen was among the best performers. The USD/JPY pair closed below 131.50 for the second time in a month.
The Euro also increased broadly as a result of remarks made by European Central Bank (ECB) officials that seem to indicate that additional rate hikes would be prudent if the financial crisis subsided. The US Dollar fell after the FOMC meeting, while the Euro gained strength, pushing the EUR/USD rate to its highest level since February 2 at 1.0911 before falling to 1.0860.
Following its meeting of the Monetary Policy Committee on Thursday, the Bank of England is poised to announce another rate increase. The mainstream forecast calls for an increase of 25 bps, especially in light of February’s unexpected acceleration of inflation, which saw the annual rate jump to 10.4%. On Wednesday, the GBP/USD exchange rate rose beyond 1.2300 but ended up close to 1.2260. Although it still has a bullish tilt, it can’t consolidate over 1.2300.
USD/CHF fell to its lowest level in a week, below 0.9200. On Thursday, the Swiss National Bank (SNB) will announce its monetary policy decision. Market participants anticipate a rate increase of 50 basis points to 1.50%.
The decrease in Wall Street equities prices hurt commodity currencies. While NZD/USD approached 0.6300 and closed the day closer to 0.6200, AUD/USD abruptly changed direction from 0.6759 to 0.6680, while USD/CAD soared down to 1.3655 before closing the day higher than 1.3730. Right now, stocks are dictating how the pairings move.
Following the FOMC meeting, the price of bitcoin fell, from $28,800 to as low as $27,700. Due to decreased US yields, gold and silver prices increased. After reaching weekly highs, the price of crude oil basically remained unchanged.
Also Read:
Less Hawkish Fed Pushes Silver, Gold , Copper Higher
Powell: Too early to say if recent effects change odds of soft landing
US Dollar Index sharply falls on FOMC decision
Fed hikes interest rate by 25 basis points as expected
EUR/USD heading to 1.0800 resistance, supported eyed at 1.0770
