There has been lots of speculation over the last week or two whether the Fed chairman, Mr Powell will have a much more hawkish tone after the initial result on the interest rate hike.
As expected, Powell raised the benchmark interest rate by 0.50 which is the biggest increase the Fed have instituted since the year 2000, but on everyone’s minds was the question whether the Fed would state more double figure rate hikes in the up & coming meetings with a much more hawkish tone
The Financial Markets have been pricing in over the last week more double rate hikes as we see the dollar rally to a 20-year high and significant down falls in Instruments that are sensitive to a more aggressive rate hike path.
The likes of Gold and equities have been underperforming leading up to the results last night.
After the rate hike result, Mr Powell did come out and state that the Fed will not be looking to be more hawkish than what their current stance is.
The equities markets saw a relief rally as higher rates for equity’s means lesser cash flow which normally reflects in lower stock prices.
Mr Powell’s comments also see the dollar lose gains against all its major currency pairings as a more aggressive stance would of seen further gains in the dollar. Gold also had a relief spike as it reflects off the movement of the green back.
A move on the upside in the dollar normally means devaluations in the precious metals sector and vice versa.
The markets will be digesting all of last night’s events, will the rally continue in the equity market? Will the dollar continue to lose strength? People eyes will be firmly fixated when the cash market opens at 2:30 UK time to see how the markets unravel.
If you do not understand the full effects of rate hikes and how it affects the financial markets, get in contact with me and I will be more than happy to assist.
Contact me at tommy@brokerguide.com
