Markets Mixed After Fed Signals that it’s Not Done with Hikes
As expected, the Federal Reserve left rates on hold this morning but also signalled that it has not finished moving rates higher in this cycle. Markets were mixed across the board with the major US stock indices having an erratic day, the Dow closing down 0.68%, the S&P flat and the Nasdaq up 0.39%. The dollar finished lower on the day against the majors but did recover some of its ground on the more hawkish tilt from the Fed. US treasury yields were also lower on the day but once again experienced a choppy trading session as investors priced in the new update.
Traders Looking for More Volatility After the FOMC Delivers
Traders are anticipating more volatility ahead in the next few sessions after the Fed delivered its anticipated ‘no change’ call in Washington. Markets had been moving strongly in anticipation of this occurring and now investors have more information at their fingertips to move into longer-term positions. Notably in the currency markets the dollar had been on the back foot recently as traders look for a more dovish Fed but we could see this trend swiftly reverse on the more hawkish tilt that we got from Jerome Powell and some positive dollar flow is already being seen early in the Asian session. Equity markets have been strong in the US with major indices hitting significant highs and we could see some corrections taking place once the New York session opens later today.
Fed Done but more to Come
It has been a busy week for traders already and the hits are set to keep coming in the day ahead as a full data calendar keeps volatility high. We have already seen strong Australian employment numbers in the Asian session but there are some more impactful events set to line up later in the day. The main focus for the European session will be the latest rate update from the ECB, it’s been overshadowed by the Fed but Euro traders will be watching this very carefully – a 25bps rate increase expected. Into the US session and we have more tier 1 data due out of the states with Retail Sales, Empire State Manufacturing, and weekly unemployment numbers all set for release.
