- Fed rate hike and geopolitics roil markets
- Bank of Japan intervenes in FX for the first time since 1998
- US dollar trading erratically after FOMC meeting
USDCAD snapshot: open 1.3480-84 overnight range 1.3417-1.3543, close 1.3467, WTI $83.56, Gold $1666.73
The Canadian dollar extended yesterday’s losses in a wild overnight session. USDCAD technicians are bullish following the break of resistance at 1.3380 and again at 1.3440, which sets the stage for further gains to the overnight peak of 1.3543.
Yesterday, the Fed hiked interest rates by 75 bps for the third time in a row but sharply increased their 2023 and 2024 interest rate forecasts. That got the markets attention.
Policymakers downgraded economic growth and raised inflation and unemployment forecasts.
When the dust had settled, the US dollar was sharply higher against the major G-10 currencies, equity and commodity prices were lower, while the US 10-year Treasury yield popped to 3.619%.
Wall Street closed with steep losses and equity underperformance was the theme in overnight markets.
The major Asian equity indexes closed with losses. The Nikkei 225 lost 0.58%, while Australia's ASX 200 was closed for a National Day of Mourning for the Queen. European bourses are trading in negative territory, led by a 0.66% drop in the French CAC index. S&P 500 and DJIA futures are flitting around unchanged.
EURUSD is in the middle of its overnight 0.9808-0.9907 range. Russia escalated tensions after threats to use nuclear weapons in defence of “Russian territory” although the territory in dispute are Ukraine provinces. Putin hopes the threat will prevent further advances by Ukrainian troops which have forced the Russian army to retreat.
Norway’s Norges Bank hiked rates by 50 bps to 2.25% due to rising inflation. The Swiss National Bank (SNB) raised rates by 0.75%, taking the overnight rate into positive territory for the first time since 2015.
GBPUSD traded wildly in a 1.1213-1.1363 range with the bottom seen in the aftermath of the Bank of England rate hike. The BoE raised rates by 0.50% which disappointed investors who expected a more aggressive response to the UK’s inflation woes.
The Bank of England assumes the UK is in a recession now and downgraded Q3 GDP growth to -0.1% from 0.4% previously.
USDJPY traded wildly in a 140.72-145.89 range before settling at 142.78 in NY trading, thanks to Bank of Japan intervening in FX markets for the first time since 1998.
AUDUSD traded in a 0.6575-0.6669 range with price action dictated by broad US dollar moves. NZDUSD trade in a similar fashion.
