- The Fed decision was as usual the most important macro event of the day. Federal Reserve decided to raise rates by 25 basis points as expected.
- The Fed left the QT programme unchanged, but kept the forward rate forecast at 5.1% unchanged.
- The Fed's change in communication is linked to problems in the banking sector. The Fed acknowledges that the tightening of credit conditions acts as a tightening of monetary conditions.
- But reducing interest rates this year is not probable and more interest hikes from the Fed may be appropriate;
- However, the Fed rules out interest rate cuts this year. The Fed believes that current policy is appropriate. This could mean a final hike in May;
- In the Fed's view, current liquidity measures are sufficient. The banking system is resilient and there is no widespread problem in the system
- In response, we saw a marked weakening of the US dollar. EURUSD rose to the 1.0900 level. In contrast, we saw strong gains on Wall Street. The US100 clearly broke through 13000 points and the US500 breached 4050 points
- Crude oil stocks rose by 1.12 million brk on expectations of a decline of 1.4 million brk. Oil gained more than 2 per cent today, making up for recent losses in oil due to uncertainty. WTI returns above $70 per barrel
- OPEC+ is not expected to consider major oil production cuts, despite recent strong price falls
- UK inflation came in higher than expected at 10.4%, resulting in a marked strengthening of the pound since the start of today's session
- A weaker dollar in the wake of the Fed's actions caused gold prices to rebound towards US$1,970 per ounce
- The euro received support from rumours that the ECB is thought to believe that recent stability measures for the banking sector should provide a basis for further hikes. Lagarde, on the other hand, spoke of the ECB not being compelled to both hike and cut or keep rates unchanged.
EURUSD tested the 1.0900 area against expectations of a near-term hike in the US. Source: xStation5
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