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The dollar is ending Wednesday firmly higher across the FX board, following the US Federal Reserve monetary policy decision.
As widely anticipated, rates and taper were left unchanged, although the statement indicates that “the Committee expects it will soon be appropriate to raise the target range for the federal funds rate.”
Ahead of the press conference, most market participants priced in a rate hike in March. There were no mentions to the balance sheet, but markets were not expecting those. Chief Jerome Powell´s press conference was a mixture, as he expressed concerns about the current wave of coronavirus and its potential to damage the economy but also said that he expects inflation to decline over the course of the year. He added that the rate-hike path would depend on incoming data and noted that it is “impossible” to predict, although he also noted that there’s plenty of room to raise rates.
Economic Data
Consumer prices in New Zealand rose the most in three decades last quarter, reinforcing the outlook for higher interest rates after the Federal Reserve added momentum to the global withdrawal of pandemic-era stimulus.
New Zealand’s consumer price index for the October-December quarter was 5.9% higher than a year earlier, an acceleration from 4.9% in the July-Septembe
Other Developments
The US Federal Reserve announced on Wednesday that the FOMC had agreed to leave the Federal Funds target range unchanged at 0.0-0.25%, in line with expectations. The central bank said that it would soon be appropriate to raise the Federal Funds rate, the strong hint that many market participants would have been looking for that a first post-pandemic rate hike in March is likely.
Earlier on Wednesday, the Bank of Canada announced that it was holding its overnight interest rate at 0.25%, as the majority of market participants had been expecting. Note that a minority had expected a 25bps rate hike to 0.50%. The central bank also signaled that a rate hike would likely be coming in March by saying that overall slack in the economy had been absorbed, satisfying the conditions outlined in the bank’s forward guidance for an interest rate hike.
Saudi Arabia is expected to raise the official selling prices of all its crude grades sold in Asia next month on the back of solid demand and refining margins.
Saudi Arabia usually sets the official selling prices (OSPs) of its crude for the following month around the fifth of each month, typically after the monthly OPEC+ meeting, which is scheduled for 2 February. The Kingdom is expected to increase all its prices for Asia for March.
Gold was among the worst performers, shedding roughly $ 30.00 per troy ounce. The bright metal settled at $1,816 a troy ounce. Crude oil prices managed to retain gains, with WTI pulling back from a daily high of $87.92 to end the day at around $86.50 a barrel.
EUR/USD trades around 1.1240, while GBPUSD hovers around 1.3460. The AUD/USD pair nears the weekly low at 0.7089, while USDCAD is currently at 1.2670. The USD/JPY pair trades at 114.60.
Stocks trimmed early gains and turned red, with the DJIA down 154 points after trading up some 400 points ahead of the event. US government bond yields jumped with the news, with that on the 10-year Treasury note peaking at 1.857%.
Tesla stock dropped after the company reported better-than-expected earnings for Q4. But the automaker’s fourth-quarter results might not be good enough for investors.
Tesla reported earnings of $2.54 a share in the fourth quarter from $17.7 billion in sales Tesla reported earnings for Q4 after the close on Wednesday. Earnings per share came in at $2.54 versus the average estimate of $2.26. Revenue was $17.72 billion versus estimates for $16.35 billion.
