Spreadex Market Update
Equities plunge, USD Higher after Largest Fed Hike Since 1994
USD rallies as Fed hikes by 75bps, marking largest hike since 1994, and lifts rates forecasts over remainder of year. Equities plunge on hawkish Fed news. BOE expected to hike rates by 25bps today. Metals reverse gains as USD rallies. Oil stabilises following sharp losses yesterday.
Key Factors for Today
- USD higher today following 75bos hike and hawkish guidance from Fed
- Equities sink on Fed tightening
- BOE expected to hike rates 25bps today
- Metals reverse yesterday’s gains
- Oil prices stabilise following heavy selling
Coming Up
- CHF SNB rate decision
- GBP BOE rate decision
- USD Philly Fed manufacturing index
USD Rallies on Hawkish FOMC
The US Dollar has seen plenty of volatility over the last 12 hours following the June FOMC yesterday. The Fed delivered its largest rate hike since 1994, lifting rates by 75bps as it cited the need to tackle rampant inflation. Along with the larger hike, the Fed also signalled a further 75bps coming in July and raised its year end rates forecast to 3.75%, suggesting a further 1.75% worth of hikes to come over the remaining four meetings of the year. The meeting was far more hawkish than traders had been expecting and USD is seeing firm buying across the European open today following some initial downside yesterday as the news broke.
Risk Sentiment Weaker Following Larger Fed Hike
Equities markets are back under pressure across the European open on Thursday. The stronger US Dollar coupled with rising yields is creating headwinds for risk assets with US stocks threatening to break to fresh lows on the back of the hawkish FOMC yesterday. In the UK, focus shifts to today’s BOE meeting, which is expected to see the BOE hiking further, creating additional pressure on asset markets.
USD & CHF Lead the Way – BOE In Focus Next
In FX, USD and CHF have been the strongest across the European open today. We saw plenty of volatility on the back of the FOMC with risk currencies rallying initially as USD weakened. However, these moves reversed over late Asian trading and risk currencies are back under pressure now.
The SNB and BOE both meet today for rate decisions. While the SNB is not expected to adjust policy, traders are bracing for hawkish signalling following recent commentary on inflation. For the BOE, traders are expecting a 25bps hike. Traders will also be looking to see how the bank addresses recent data weakness and rising recessionary fears.
Gold & Silver Give Up Gains
Metals prices are back under pressure today following a strong rally yesterday as gold and silver capitalised on initial post-FOMC USD weakness. With the dollar back in demand today, however, strength in metals has faded and downside risks abound should the greenback continue higher into the weekend.
Oil Stabilises but Vulnerable to Further Downside
Oil prices have stabilised over early European trading today following a drop lower yesterday. Crude futures are currently around 6.5% down from last week’s highs. The EIA reported a 2-million-barrel surplus in US crude stores yesterday which added pressure. Today, the stronger start in USD looks likely to set the tone for oil prices.
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