Dollar pulls back after Fed hikes

 

“The value of an idea lies in the using of it.” — Thomas Edison 

 

HEADLINES

 

• Dollar drops after Fed hikes rates as expected 
• Gold recovers early losses, trades around the flatline after the Fed raises rates
• Oil jumps 5% as EU proposes ban on Russian oil
• Stocks take Fed rate hike in stride, crude jumps
• Dow rallies 400 points after Powell rules out larger rate hikes
• Reformer pitches Musk trendy "public benefit" structure for Twitter
• GBP/USD set to drop below the 1.24 level this week – Scotiabank
• EURUSD Short Term: Downside favored

 

 

FOREX

 

Dollar drops after Fed hikes rates as expected 

 

The dollar fell in volatile trading against a basket of currencies on Wednesday after the Federal Reserve raised its benchmark overnight interest rate by half a percentage point, the biggest jump in 22 years. 

The rate increase was widely expected. The U.S. central bank set its target federal funds rate to a range between 0.75% and 1% in a unanimous decision, with further rises in borrowing costs of perhaps similar magnitude likely to follow.

The dollar index was last at 103.20, after getting as low as 103.07 immediately after the Fed statement.

 

COMMODITIES

 

Gold recovers early losses, trades around the flatline after the Fed raises rates 

 

Gold prices were flat Wednesday, after the Federal Reserve announced a half percentage rate hike. 

The move was largely expected by the Street. “A 50 basis point hike is now priced in by markets ... If the statement has a still more hawkish bias, then gold is likely to come under pressure once again,” said OANDA senior analyst Jeffrey Halley.

The dollar remained close to 20-year peaks, making greenback-priced gold less attractive for overseas buyers.

 

Oil jumps 5% as EU proposes ban on Russian oil 

 

Oil prices jumped on Wednesday as the European Union, the world’s largest trading bloc, spelled out plans to phase out imports of Russian oil, which offset worries about demand in top crude importer China.

Europe imports some 3.5 million barrels of Russian oil and oil products daily, and also depends on Moscow’s gas supplies.

In the United States, crude stocks rose modestly last week, according to the U.S. Energy Information Administration. Stocks were up 1.2 million barrels as the United States released more barrels from strategic reserves.

 

STOCKS

 

Stocks take Fed rate hike in stride, crude jumps 

 

U.S. stocks initially rose and Treasury yields trimmed gains on Wednesday after the Federal Reserve raised interest rates by 50 basis points as expected and said it would begin to reduce its balance in June. 

But stocks on the tech-centric Nasdaq (.IXIC) gave up initial gains as did MSCI's all-country world index. Earlier, a rise in Treasury yields had hit growth stocks as the market anticipated the Fed's rate hike.

The yield on 10-year Treasury notes rose 1.5 basis points to 2.973%, after earlier rising to 3.011%.

 

Dow rallies 400 points after Powell rules out larger rate hikes

 

Stocks jumped Wednesday as investors digested the Federal Reserve’s big interest rate decision, where the central bank hiked rates by half a percentage point.

The central bank announced that it was hiking its benchmark interest rate 50-basis-points, or 0.5 percentage points. That is the biggest hike since 2000 for the Fed, but the move was widely expected by investors.

Stocks then moved sharply higher when Fed Chair Jerome Powell said the central bank was not considering a 75-basis-point hike in future meetings.

 

Reformer pitches Musk trendy "public benefit" structure for Twitter

 

A prominent corporate reformer is pitching a trendy idea to Elon Musk as he takes control of Twitter Inc: turn the social-media platform into a "public benefit corporation" to work for the benefit of all stakeholders, not just investors.

Once Twitter is taken private, Alexander said, "all the pressure that you might feel from public shareholders to maintain a healthy online discourse will go away."

After inking a deal to buy Twitter for $44 billion last week, Musk said he wanted to enhance the platform with new features, make its algorithms open source to increase trust, defeat spam bots, and authenticate all humans.

 

ANALYSIS

 

GBP/USD set to drop below the 1.24 level this week – Scotiabank 

 

“With the Fed set to deliver a hawkish hike today that perhaps even opens the door to a 75bps hike (if necessary), the GBP is at risk of firming its losses to a break under 1.24 this week.”

“Political uncertainty following tomorrow’s local elections (results due through Friday) could further see the GBP weaken in the near-term.”

 

CHART

 

EURUSD Short Term: Downside favored

Technical View: Short position below 1.06. Target 1.0455. Conversely, break above 1.06, to open 1.0655.

Comments: The pair remains under pressure. Further weakness favored.

 

 

 

Source: Trading Central 

 

 

CALENDAR

 

*Times in GMT

 

 

 

Source: FX Street Economic Calendar

 

Footnotes

https://www.reuters.com/business/dollar-just-off-20-year-highs-rally-hinges-fed-signals-2022-05-04/
https://www.cnbc.com/2022/05/04/gold-markets-federal-reserve-us-treasury-yields.html
https://www.cnbc.com/2022/05/04/oil-markets-us-crude-stocks.html
https://www.reuters.com/business/global-markets-wrapup-1-2022-05-04/
https://www.cnbc.com/2022/05/03/stock-market-futures-open-to-close-news.html
https://www.reuters.com/business/reformer-pitches-musk-trendy-public-benefit-structure-twitter-2022-05-04/
https://www.fxstreet.com/news/gbp-usd-set-to-drop-below-the-124-level-this-week-scotiabank-202205041311