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As expected, the Federal reserve hiked rates 75bp on Wednesday as the Fed battles to control record inflation whilst attempting to avoid a deep recession. Markets were relatively behaving as expected on the decision and statement up until the Fed chair Powell’s presser anyway.
Whilst Powell reiterated the Feds mission to tame inflation statements such as “likely appropriate to slow increases at some point” and any further increases will be “data dependent.” Were seen as dovish pivot, resulting in rate hike odds and the USD tumbling while Stocks, Bonds, Gold, & Crypto soared as the market re-priced medium term interest rate expectations to the downside.
Powell gave no indication of what to expect in September, instead stating that future decisions would be “data dependant” and “meeting by meeting”, without this solid guidance it looks like “bad news is good news” again, weaker economic figures going forward will be seen by the market as bullish for equities on the expectation rate hikes will be curtailed.
The US Dollar index gave back Tuesdays gains, testing the recent support level of 106.24
Gold and Oil both rallied strongly on lowered rate expectations and recession fears dissipating.
Risk on Bitcoin also saw a big jump following the Nasdaq which was the best performing US index.
Looking forward, today will see the Advance Q2 GDP released in the US, Chairman Powell stated last night he would be taking it with “a grain of salt” so it’s affect may be muted somewhat, though with “bad news being good news” an extremely weak figure could see the markets repricing rate hike expectations lower again.
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