The dollar jumped to a six-month high against a basket of currencies yesterday. U.S. Treasury yields hit multi-year high after the Federal Reserve policy decision.
Central bank kept the interest rate unchanged in the range of 5.25%- 5.50%, as widely expected and warned that U.S. interest rates will remain higher for longer. The Fed’s decision to hold rates steady followed recent evidence that its 11 rate-hikes delivered so far are starting to turn the tide in the battle against inflation.
Further, Powell said that the Fed will cut rates by a smaller-than-expected margin in 2024, amid a recent rise in U.S. inflation. The comments blindsided markets hoping for more monetary easing next year, triggering strong flows into the dollar and out of Treasuries. This saw the 10-year benchmark race to a 15-year high, while 2-year yields jumped to their highest levels since early-2001.
Crude oil prices paused the recent rally and retreated by 1.76%, following the Fed policy decision. Adding to this, Government data showed on Wednesday that U.S. crude inventories shrank slightly less than expected in the week to September 15. But more positive was an unexpected draw in gasoline and distillates, as refiners slowed down production with the end of the summer season.
The dollar index which measures the currency against six major counterparts, was up 0.22% at 105.441.
MCX Gold futures settled at 59405 up 0.21%. Silver at 73230, up 0.91%. Copper prices settled at 727.20 almost flat. Crude oil settled at 7475 down 1.76%. Natural gas settled at 227 down 4.22%.
Economic data and events scheduled today
U.K.
At 11.30am-Public Sector Net Borrowing. Data is foreseen at 9.8B from previous 3.5B.
At 4.30pm –
Monetary Policy Summary.
MPC Official Bank Rate Votes. Foreseen at 7-0-2 from 8-0-1 previous.
Official Bank Rate. Data is foreseen at 5.50% from 5.25% previous.
Tentative – BOE Inflation Letter.
All above data and events could have a volatile impact on the pound.
Eurozone
At 1.30pm – German Buba President Nagel Speaks.
At 7.30pm- ECB President Lagarde Speaks.
At 7.30pm – Consumer Confidence. Data is foreseen at -16 unchanged from previous.
All above data and speech could have a volatile impact on the Euro.
CANADA.
At 6.00pm -NHPI m/m. Data is foreseen at 0.0% from previous -0.1%.
Above data could have a neutral impact on the dollar.
U.S.
At 6.00pm –
Unemployment Claims. Foreseen at 224K, from previous 220K.
Philly Fed Manufacturing. Index. Data is foreseen at -1.1 from previous 12.0
Current Account. Data is foreseen at -220B from previous -219B.
At 7.30pm –
Existing Home Sales. Data is foreseen at 4.10M from previous 4.07M.
CB Leading Index m/m. Data is foreseen at -0.5% from previous -0.4%.
At 8.00pm – Natural Gas Storage. Foreseen at 65B from previous 57B.
All above data could have a negative impact on the dollar.