💲 USD gains and indices drop after Fed rate decision
FOMC decided to keep rates unchanged at a meeting today, in-line with market expectations. However, new set of economic projections pointed to a higher GDP growth forecasts than March projections as well as slower progress on core inflation this year. On top of that, median rate forecast in dot-plot increased and now points to rates at 5.6% at the end of 2023, up from 5.1% in March projections, and at 4.6% at the end of 2024, up from 4.3% in March projection. Fed also did not rule out additional tightening later this year.
Market saw this decision as a 'hawkish' pause, leaving the door open for more rate increases should the situation require. Market pricing also turned more hawkish after the decision with swap market no longer pricing in Fed rate cuts in 2023.
Start investing today or test a free demo
Create account Try a demo Download mobile app Download mobile appUSD gained on the decision with EURUSD slumping from 1.0850 to 1.0800 area. Wall Street indices also took a hit with S&P 500 futures (US500) dropping around 0.5% following the decision and testing 4,350 pts area. Gold dropped back below $1,950 amid USD strengthening and increase in yields. As it seems that hawkishness of the decision surprised markets (dot-plot suggests more than one hike this year), traders should expect elevated volatility during Powell's presser, which is set to begin at 7:30 pm BST.
EURUSD failed to break above the 50-session moving average (green line) in the 1.0850 area and started to erase daily gains after Fed 'hawkish' pause. Source: xStation5
S&P 500 futures (US500) turned negative following Fed decision. Source: xStation5
The content of this report has been created by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, (KRS number 0000217580) and supervised by Polish Supervision Authority ( No. DDM-M-4021-57-1/2005). This material is a marketing communication within the meaning of Art. 24 (3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II). Marketing communication is not an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulation (EU) 2016/958 of 9 March 2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest or any other advice, including in the area of investment advisory, within the meaning of the Trading in Financial Instruments Act of 29 July 2005 (i.e. Journal of Laws 2019, item 875, as amended). The marketing communication is prepared with the highest diligence, objectivity, presents the facts known to the author on the date of preparation and is devoid of any evaluation elements. The marketing communication is prepared without considering the client’s needs, his individual financial situation and does not present any investment strategy in any way. The marketing communication does not constitute an offer of sale, offering, subscription, invitation to purchase, advertisement or promotion of any financial instruments. XTB S.A. is not liable for any client’s actions or omissions, in particular for the acquisition or disposal of financial instruments, undertaken on the basis of the information contained in this marketing communication. In the event that the marketing communication contains any information about any results regarding the financial instruments indicated therein, these do not constitute any guarantee or forecast regarding the future results.
