Rate rises everywhere!
23 March 2023
Yesterday, the FED hiked rates by another 25bp, lifting them to the round level of 5%. The increase itself was not the most important event yesterday; traders shifted their attention towards the statement and press conference. Jerome Powell was slightly dovish this time, confirming that hikes are nearing the end. The FOMC claimed that future increases are not certain and that they will be data-dependent.
The reaction to the Dollar was pretty straightforward – the USD dropped. Currently, the EURUSD is creating a sixth consecutive bullish candle, while the USDJPY dropped yesterday to the lowest levels since the February 10. Although the rate decision from the US was a key event in this week’s calendar, there are more rate decisions to come today. The SNB is expected to hike by 50bp early in the European session, and the Bank of England is expected to rise rates to 4.25% mid-day, which would mean the same hike as the FED, i.e. 25bp.
Surprisingly, it seems that the prospect of higher rates in the UK doesn’t increase the appetite for the British Pound. The GBP lost yesterday and is not showing great strength today, either. The strongest currencies on the market right now are the Australian and New Zealand Dollars, which are up by more than 0.5%.
Commodities reacted to the FED with a rise. Gold is currently around 1980 USD/oz and is looking forward to testing the 2000 USD/oz again. Oil created a third consecutive bullish day but the hype here is much less significant. We can assume that the gains in commodities generally contributed to the weaker Dollar.
Indices dropped sharply yesterday, but Thursday starts with a shy recovery attempt. Apart from the fundamental reasons to sell, we have had a few technical ones as well. First of all, it was a take-profit action from the gains that occurred in the first half of the week. What is more, some indices met and bounced off key resistances. Dow Jones tested 32500 points resistance, while DAX did the same with the 15250. As long as we stay below these, we do not have a full-fledged buy signal on the said indexes.