Markets barely move after Fed’s decision
2023-07-27
Summary:
Global shares were mostly flat while U.S. yields fell on Wednesday after the Fed delivered its 11th consecutive hike in interest rates aimed at reining in rising consumer prices.
Global shares were mostly flat while U.S. yields fell on Wednesday after the Fed delivered its 11th consecutive hike in interest rates aimed at reining in rising consumer prices.
The rate hike, which was in line market expectations, took the benchmark overnight interest rate to between 5.25% and 5.50% - the highest level since around the global financial crisis in 2007-2009.
Gold prices gained buoyed by a pullback in the dollar and bond yields. Oil prices settled around 1% lower as data showed U.S. crude inventories fell less than expected.
Commodities
Powell said ‘it’s not an environment where we want to provide a lot of forward guidance’ about future rate actions, and whether the Fed hikes again will be determined by where the data stands at the time of future policy gatherings.
Meanwhile, U.S. crude inventories drew by 600,000 barrels last week, according to the EIA, compared with estimates for a draw of 2.35 million barrels. Industry group American Petroleum Institute figures had indicated a 1.32 million-barrel build.
Wednesday's oil price losses were limited as inventories at Cushing, the pricing point for WTI, remain near their lowest levels since May, ANZ Research said in a note.
‘We expect Brent oil futures will rise to $85 per barrel by the fourth quarter on expectations that OPEC+ supply cuts and resilient demand will force global oil stockpiles to fall,’ Commonwealth Bank of Australia said in a note.
Forex
The dollar fell although the Fed citied still-elevated inflation as a rationale for what is now the highest U.S. central bank policy rate in 16 years.
The ECB is expected to deliver a similar hike on Thursday, but budding evidence of an economic slowdown has called into question the chances of another by year-end.
The BOJ will hold its meeting on Friday, which might shed light on its yield curve control policy. Speculation about a hawkish tweak to that policy led the yen to soar earlier in the month, but it has receded in recent days.
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