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Fed raise interest rates by 50 bps


US stocks turned lower after the Federal Reserve released the raise of rates by half a percentage point. However, while the Fed has downshifted the pace of tightening, the message given to the financial markets is that they’re not done yet.

While the Fed has signalled its plans to keep lifting rates next year to combat high inflation Fed chair Jerome Powell was speaking and his comments seemed to have given mixed messages to the market. In US Treasury yields, the flips with the 10-year falling back from a high of 3.5610% to print 3.477% currently and on the way towards the day’s low of 3.46%.

Though the raise is 50bps this time, its economic projections see higher rates for a more extended period. the data comes in hotter than expected, but the investors projected at least an additional 75 basis points of increases in borrowing costs by the end of 2023, as well as a rise in unemployment and a near-stalling of economic growth.

The Dow Jones Industrial Average has dropped 0.42% to close at 33966.35. The S&P 500 dropped 0.61% to close at 3995.32. The tech-heavy Nasdaq Composite dropped 0.76% to close at 11170.89. Despite the Fed statement, U.S. Treasury yields were slightly lower after initially jumping in the wake of the announcement, and the strategy of aggressive interest rate increases by major central banks around the world this year has increased worries the global economy could be pushed into a recession and weighed heavily on riskier assets such as equities this year. Further, the US Treasury bond yields go up and down. U.S. 10-year treasury yield sits at around 3.503%. The policy-sensitive 2-year treasury yield sits at 4.247%.

Main Pairs Movement

The US Dollar is tailing off from the highs that were made on what was perceived to be a hawkish rate hike of 50 basis points by the United States Federal Reserve. The US Dollar is back on its backside following a mixed reaction to the Fed event. While the Fed has signalled its plans to keep lifting rates next year to combat high inflation, and this is a sign of two-way price action in asset classes, including the US Dollar and bonds.

The Gold price had fallen back to $1806, and still can’t break the resistance at $1810, though there were volatile moves over the interest rate decision and policy guidance by the Federal Reserve. The precious metal displayed wild gyrations in the $1.796-1,814 range and has now turned extremely quiet 4 hours after the speech.

The EURUSD is aiming at breaking 1.0700, as per the investors’ estimated, EUR/USD soars as US CPI comes in below expectations, 1.0700 is a key level where a measured move of -0.272% of the potential correction’s range to support meets the prior mid-summer resistance looking left, the next level is 1.0790.

Economic Data

CurrencyDataTime (GMT + 8)Forecast
USDFOMC Interest Rate Decision03:004.5%
USDFOMC Press Conference03:30
NZDGDP (Q3)05:450.9%
AUDEmployment Change (Nov)08:3019K
CNYIndustrial Production (Nov)10:003.6%
CHFSNB Interest Rate Decision (Q4)16:301%
CHFSNB Press Conference17:00
EUREU Leaders Summit18:00
GBPBoE Interest Rate Decision (Dec)20:003.5%
EURECB Interest Rate Decision (Dec)21:15
USDCore Retail Sales (Nov)21:300.2%
USDInitial Jobless Claims21:30230K
USDPhilidelphia Fed Manufacturing Index (Dec)21:30-10
USDRetail Sales (Nov)21:30-0.1%
EURECB Press Conference21:45
EURECB President Lagarde Speaks23:15