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US treasuries rallied on Wednesday, owing to slower-than-expected hiring and a surprising loss from New York Community Bancorp, heightening concerns about the sustainability of US regional lenders.
New York Community Bancorp wrote down poor bad estate loans, dropping its shares 36% and pushing down regional bank share values across the United States.
Gold prices surged to two-week highs above $2050 per troy ounce before falling to roughly $2030 following the US rate announcement, while silver prices extended Tuesday’s losses and crossed the $23.00 barrier.
The Federal Reserve left interest rates constant at its event on Wednesday, deleting language about prospective rate hikes and stressing that inflation remained high and economic activity is increasing at a rapid pace.
After a weak performance earlier in the day, the dollar gained further strength in response to Chief Powell’s hawkish tone at its press conference following the Fed’s widely anticipated decision to leave rates unchanged, motivating the USD Index to shed its initial pessimism and regain upside traction.
Following FOMC’s rate decision, EUR/USD tested year-to-date lows in the sub-1.0800 range, extending its multi-session consolidative trend. The final Manufacturing PMI for the eurozone is due on Thursday, as is the bloc’s flash inflation rate and ECB President Lagarde’s speech.
The British pound will have a big day on February 1 when the Bank of England meets and is widely expected to maintain the current monetary policy. Further data will reveal the final Manufacturing PMI for the month of January. Meanwhile, GBP/USD has remained trapped in the 1.2600 to 1.2800 area for the past year.
USD/JPY fell somewhat as US rates fell, momentarily approaching the 146.00 support level. On Thursday, the only note issued in Japan will be the weekly Foreign Bond Investment.
In the immediate future, AUD/USD is anticipated to remain range-bound. Thursday’s calendar in Oz includes advanced prints for Building Permits in December.
Crude oil prices dropped markedly in response to a larger-than-expected build of US weekly stockpiles, while Chinese concerns also helped with the downside. WTI closed -2.50% down at $75.69 per barrel, and Brent lost 2.31% standing at $80.39 per barrel.
Moving forward, Initial Jobless Claims and the ISM Manufacturing PMI should take centre stage on February 1.
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