Daily summary: Volatility jumps after Fed delivers 'hawkish' pause

• Wall Street indices had a volatile session, dropping after FOMC decision and recovering during Powell's presser. Dow Jones trades 0.7% lower, Russell 2000 drops 1%, S&P 500 trades flat and Nasdaq gains 0.2%

• FOMC decided to hold rates unchanged in the 5.00-5.25% range in an unanimous 11-0 vote

• Decision triggered a hawkish reaction on the markets - USD rallied while equities drop

• Hawkish reaction was driven by a new set of economic projections. Namely, new dot-plot suggested not one, but two more rate hikes this year

• Swap market no longer prices Fed rate cuts in 2023

• Powell said during press conference that nearly all Fed members see further rates hikes this year as appropriate

• Powell said that Fed members did not discuss July meeting but he expects July to be 'live meeting'

• General takeaway from the decision and Powell's presser was that pace of rate hikes is moderating but hikes are not over yet

• Money markets see an around-60% chance of a 25 bp rate hike at July meeting

• Markets made a U-turn during Powell's press conference and have erased majority of post-decision moves

• European stock market indices traded higher today. German DAX gained 0.5%, UK FTSE 100 moved 0.2% higher while French CAC40 added 0.6%. Italian FTSE MIB jumped 0.9% while Spanish IBEX traded 1.2% higher.

• Wall Street Journal reported that United States has resumed negotiations with Iran on prisoner exchange and nuclear issues

• US PPI inflation slowed more than expected in May. Headline gauge slowed from 2.3% to 1.1% YoY (exp. 1.5% YoY) while core measure slowed from 3.1% to 2.8% YoY (exp. 2.9% YoY)

• UK GDP report for April came in at 0.5% YoY (exp. 0.6% YoY), marking an acceleration from 0.3% YoY recorded in March

• UK industrial production dropped 1.9% YoY in April (exp. -1.8% YoY)

• Euro area industrial production increased 0.2% YoY in April (exp. 0.9% YoY)

• Swedish CPI inflation decelerated from 10.5% to 9.7% YoY in May (exp. 9.5% YoY)

• EIA report showed a massive 7.9 million barrel build in US oil inventories (exp. -0.5 mb). Gasoline and distillate inventories increased around 2.1 million barrel each, also more than expected

• TRY gained after Turkish President Erdogan said that he accepted steps that finance minister Simsek and CBRT chief Ergan will take

• NZD and CHF are the best performing major currencies while USD and CAD lag the most

Nasdaq-100 (US100), just like other US indices, dropped in the aftermath of the FOMC decision. However, the index gradually recovered during Powell's presser and is trading back into positive territory near the 15,000 pts mark. Source: xStation5