Daily market commentary: The US dollar bounced back as the Federal Reserve announced an interest rate hike of 0.5%


The US dollar bounced back from a six-month low, after the Federal Reserve announced an interest rate hike of 0.5%. The hike itself had been anticipated and already priced-in by the markets, but the message conveyed by Jerome Powell after the announcement caused some surprise amongst investors. The chairman of the Fed reiterated the central bank’s intention to control inflation, indicating that rates are expected to top 5% when they peak. The main takeaway from Powell’s message was that, despite signs of softening in inflation and looming recession risks, the Fed has no intention to pivot. Rates will continue to rise in 2023, remaining elevated for longer than previously expected

The figures revealed that consumer prices rose less than expected for the second month in a row, strengthening the case for slower rate hikes, with the Fed now more likely to announce a 50 basis points increase later today, instead of previously assumed 75 bp. Against this background, there may be scope for further dollar weakness.

Ricardo Evangelista – Senior Analyst, ActivTrades

Disclaimer: opinions are personal to the authors and do not reflect the opinions of LeapRate. This is not a trading advice.


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