- The AUD/USD faced volatility, initially retreating from 0.6835 to 0.6755, and then stabilized around 0.6800 after Powell presser.
- Fed left rates unchanged at 5.00%-5.25% as expected.
- An upwards revision of the median terminal rates hints at more hikes in 2023.
The AUD/USD cleared part of its daily gains, retreating to 0.6800 after the Federal Reserve (Fed) decision to hold rates steady. Additionally, an upward revision of the terminal rate to 5.6% was confirmed, indicating the likelihood of two additional 25 basis points (bps) increases. In their statement, the Fed clarified that keeping rates unchanged during this meeting would enable the members of the Federal Open Market Committee to evaluate further information regarding its impact on monetary policy.
US yields recovered some ground as the Fed hinted at more hikes
Following the statement, the 10-year US bond yield recovered to 3.80%. On the other hand, the US stock market weakened, as all three major indices are in negative territory. The S&P 500 index (SPX) is seeing a 0.6% slide, the Dow Jones Industrial Average (DJI) a 1.19% loss, and the Nasdaq Composite (NDX) a 0.58% decrease.
For the following sessions, investors' assessment of the monetary policy statement, macro forecasts and Chair Powell’s comment will dictate the pace of the markets. That being said, the economic projections indicate a slower growth pace, a robust labour market and slower progress on inflation. Regarding the press conference, Powell focused on the need to pause following a consecutive 500 bps hike since last year to asses further information
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