Dollar rebounds after Fed rate hike

20 December, 2018

In a widely expected move, the Federal Reserve has raised its key interest rates by 25 basis points for the fourth time this year.

However, the central bank’s less dovish than expected tone came as a surprise that sent shockwaves across financial markets. Investors who were hoping for a firmly dovish statement that dropped the phrase “further gradual increases” where left disappointed after the Fed flagged “some further gradual increases” on rates were still on the cards. Although the dot plot was revised lower to two rate hikes for 2019 from three previously, the Fed’s less dovish stance sent jitters through US stock markets.

Investors seem concerned with the fact that the Fed is signalling further rate hikes despite such unfavorable market conditions and lower economic growth forecasts for 2019. It is worth noting that hawkish comments from Fed Chairman Jerome Powell compounded to the uncertainty, especially when considering how Powell was dovish a few weeks ago.

While the Dollar has the potential to extend gains on the hawkish Fed hike, bulls still remain a threat of running out of steam. With the Fed likely to adopt a data dependent approach to monetary policy decisions next year, the Dollar is poised to become highly sensitive to domestic economic data. Signs of the US economy experiencing a slowdown will weigh on prospects of higher US interest rates – ultimately pressuring the Dollar.

Yuan unfazed by Fed rate hike

The Chinese Yuan offered a fairly muted response after the Federal Reserve raised interest rates by 25 basis points.

With the US rate hike already heavily priced in, the Yuan was most likely concerned with other pressing market themes like ongoing trade tensions. With global growth fears and other geopolitical risk factors weighing on investor confidence, emerging market currencies remain vulnerable to downside shocks. In regards to the technical picture, the USDCNY could retest 6.90 if the Dollar continues to appreciate.

Source link  
A sea of green across Asian markets

It's a sea of green for Asian equities and currencies on Wednesday, after US President Donald Trump said that he will hold extended...

Excitement in financial markets

The day that investors have been eagerly awaiting in anticipation for at least the past month is finally here! The latest Federal Reserve interest...

Fed messaging key focus for week ahead

Asian currencies began the new week on a mixed note against the US Dollar index, with the DXY holding on to gains around the 97.5 mark...

Asian stocks ease up on risk-on mode

With Asian stocks following Wall Street lower on Thursday, the US-China trade tensions appear to have knocked the wind out of risk-on sails for now...

Dollar rebounds after US-Mexico deal

The US Dollar index (DXY) has rebounded slightly to trade around the 96.7 level at the time of writing, after the May US non-farm payrolls data came in...

Risk sentiment clipped by concerns

It is shaping up to be yet another rough, rocky and unpredictable trading week for financial markets as investors tussle with a number of different themes

Europe Parliament election results

As results from the European Parliament elections continue to trickle in at the time of writing, provisional results show pro-EU parties pushing...

Political risks keep Euro on back foot

It's been a horrid month for Theresa May, as uncertainty around the fate of the UK Prime Minister and her Brexit plans have sent the Pound plummeting...

Offshore Yuan hitting 7 top of headlines

The turn for the worst that has transpired with the unforeseen breakdown in US-China trade relations over the past two weeks has accelerated...


Share it on:   or