Spreadex Market Update
Markets Left in Limbo As Fed Pivots But Signals Rates Higher For Longer
Equities Muted Following Hawkish Fed Outlook
Equities traders were hoping for a clear-cut win yesterday at the FOMC. However, despite the Fed finally pivoting on rates, the more hawkish outlook in terms of a longer duration of tightening and a higher peak rate kept equities markets muted yesterday. With further tightening due today from both the BOE and the ECB, equities are likely to remain fairly constrained. Moves have been most prominent in US stocks with the Nasdaq and S&P both down over 4% from the post-inflation highs seen on Tuesday, headlining the weakness in equities.
Focus Shifts to BOE & ECB
In FX, a stronger start for the US Dollar across the European open today is weighing on the rest of G10 FX. Risk currencies are taking the hardest hit today with AUD and NZD down most. While we have further US data today by way of retail sales, headline focus today will be on the BOE and ECB meetings due. Both are expected to hike rates by at least a further 50bps, with upside risks into both meetings. As with the Fed, the greater focus will be on the forward guidance issued by the banks which holds the power to drive either currency higher against USD if perceived to be more hawkish.
Metals & Crude Capped By Stronger Dollar
In the metals and commodities space, both gold and silver turned sharply lower on the back of the FOMC yesterday. With the Fed projecting rates to be higher for longer and USD seeing better demand, both metals look vulnerable to further losses near-term. Crude prices are starting the day on a weaker footing also with futures turning lower after three consecutive days of gains. Yesterday, the EIA unexpectedly reported a huge 10.2 million barrel surplus in crude inventories, adding to bearish sentiment.
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