Account

New to ADSS? Open an
account now to get started.

OR

Already have an account?

Account

New to ADSS? Open an
account now to get started.

Add funds to your ADSS account

Trending markets
TradingView pricing is indicative
Trends & Analysis
Analysis
Last week’s bear market rally in US equities looks more likely to be fragile.
News
FedEx delivers revenue concerns, but shares rise
News
US dollar retreats amid growth concerns
Trends & Analysis
Analysis
Last week’s bear market rally in US equities looks more likely to be fragile.
News
FedEx delivers revenue concerns, but shares rise
News
US dollar retreats amid growth concerns

Add funds to your ADSS account

Trending markets
TradingView pricing is indicative

Account
New to ADSS? Open an
account now to get started.
Open an account Login

News

US Federal Reserve announces big rate hike

 

Thursday, June 16, 2022

The news shaping the markets today

The US President reaffirmed support for Ukraine, announcing another $1 billion in weapons for the country in its ongoing war with Russia. With no end of the conflict in sight, WTI crude oil rose after the news.


The Hong Kong Monetary Authority increased its base rate by 75 basis points to 2.0%, sending the HKD/USD forex pair slightly higher this morning.


Australia’s unemployment rate came in unchanged from the previous month, at 3.9% in May, with a steady recovery in the country’s economy from the pandemic. The AUD/USD pair rose in forex trading this morning.


The Macao Monetary Authority boosted its base rate by 75 basis points to 2% at its latest meeting. However, the MOP/USD forex pair remained under pressure.


China’s average new home prices fell by 0.1% year-over-year in May, following a 0.7% increase in the previous month. Despite the recent reading representing the first decline in new home prices since September 2015, the CNY/USD pair rose in forex trading this morning.

 

What’s happening: The US Federal Reserve increased its target fed funds rate by 0.75% after the commencement of its latest two-day policy meeting.

What happened: The latest rate hike, announced by the US central bank on Wednesday, is the most aggressive increase since 1994.

Fed officials also lowered their 2022 economic growth forecast, while increasing their inflation projections.

Why it matters: Inflation has become a burning issue for the Federal Reserve, having surged to a four-decade high in May.

Ending weeks of speculation, the FOMC (Federal Open Market Committee) boosted its benchmark funds rate to a range of 1.5%-1.75%. Fed officials indicated that the FOMC could raise rates to 3.4% by yearend and to 3.8% next year.

All FOMC members voted in favour of raising rates by 0.75%, with the exception of Kansas City Fed President Esther George, who preferred a smaller half a percentage point hike.

The recent rate hike came after the recently released data showed little progress to control the sharp increase in prices. However, the US economy added 390,000 jobs in May, significantly higher than the projections of 325,000 jobs.

The Fed also lowered its outlook for the US economy. GDP growth is now expected to slow to 1.7% this year, versus the earlier projection of 2.8%. The unemployment rate is expected to increase to 3.7% by yearend.

The inflation projection, as measured by personal consumption expenditures, was also raised to 5.2% for the year, from the earlier estimate of 4.3%. Core inflation is seen at 4.3%, up 0.2 percentage points from the prior estimates.

How the stock market responded: US stock markets rose sharply following the Fed announcement. The Dow Jones index jumped around 304 points to close at 30,668.53, while the S&P 500 and Nasdaq 100 added 1.46% and 2.49%, respectively, on Wednesday.

What to watch: Investors will keep an eye on data releases for inflation and unemployment, which could impact the Fed’s next interest rate decisions.

The markets today

The British pound will be in focus today ahead of the Bank of England’s interest rate decision

Context: The GBP/USD forex pair rebounded from its weakest level since March 2020 on Wednesday.

Details: The sterling dipped below the $1.20 support level on Tuesday for the first time since the covid-19 plunge in March 2020. However, the British currency recovered sharply during Wednesday’s session.

The UK’s economy unexpectedly contracted by 0.3% in April, after shrinking 0.1% in the previous month, recording the first back-to-back contraction since the covid-19 pandemic in March and April of 2020.

Inflation in Britain has also been running at 40-year highs and is projected to reach double digits in the third quarter. Britain’s Consumer Prices Index accelerated to 9% in the twelve months to April 2022, the highest level since 1982.

Traders also digested the US Fed’s latest rate hike of 75 basis points. A decline in the US dollar provided support to the British pound. The US dollar index, which measures the greenback’s performance versus a basket of major rivals, fell around 0.4% to 105.16 on Wednesday.

The GBP/USD forex pair settled higher by 1.5% at $1.2177 on Wednesday. The pound also recorded sharp gains versus the euro, rising around 1.3% to 85.78 pence.

What to watch: Traders await the Bank of England’s interest rate decision due today. UK’s central bank had raised the key bank rate by 25bps to 1% in May and is expected to hike rates further to 1.25% at its latest meeting.

Other Markets: European trading indices closed higher on Wednesday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 up by 1.20%, 1.36%, 1.35% and 1.42%, respectively.

Support & resistances for today

Technical Levels News Sentiment
USD/JPY – 134.45 and 134.70 Positive
AUD/USD – 0.6996 and 0.7022 Negative
Gold – 1831.46 and 1834.76 Positive
Platinum – 934.36 and 939.46 Positive
Nasdaq 100 – 11524.35 and 11701.94 Positive

Market snapshot

Futures at 0400 (GMT)
EUR/USD (1.0439, -0.07%) Dow ($30,776, 0.41%) Brent ($119.51, 0.8%)
GBP/USD (1.2155, -0.18%) S&P500 ($3,811, 0.47%) WTI ($116.48, 1%)
USD/JPY (134.59, 0.56%) Nasdaq ($11,695, 0.56%) Gold ($1,832, 0.7%)

What else to watch today

Eurozone’s labour costs, wage growth and European Union’s passenger car sales, Italy’s inflation rate, Spain’s balance of trade, Turkey’s gross foreign exchange reserves, Canada’s manufacturing sales, US housing starts, building permits, Philadelphia Fed manufacturing index, initial jobless claims, continuing jobless claims, Philly Fed business conditions subindex and natural gas stocks change, as well as Russia’s GDP growth rate.


Site by Pink Green
© ADSS 2022


Investing in CFDs involves a high degree of risk that you will lose your money due to the use of leverage, particularly in fast moving markets, where a relatively small movement in the price can lead to a proportionately larger movement in the value of your investment. This can result in loses that exceed the funds in your account. You should consider whether you understand how CFDs work and you should seek independent advice if necessary.

ADS Securities LLC (“ADSS”) is authorised and regulated by the Securities and Commodities Authority (“SCA”) in the United Arab Emirates as a trading broker for Over the Counter (“OTC”) Derivatives contracts and foreign exchange spot markets. ADSS is a limited liability company incorporated under United Arab Emirates law. The company is registered with the Department of Economic Development of Abu Dhabi (No. 1190047) and has its principal place of business at 8th Floor, CI Tower, Corniche Road, P.O. Box 93894, Abu Dhabi, United Arab Emirates.

The information presented is not directed at residents of any particular country outside the United Arab Emirates and is not intended for distribution to, or use by, any person in any country where the distribution or use is contrary to local law or regulation.

ADSS is an execution only service provider and does not provide advice. ADSS may publish general market commentary from time to time. Where it does, the material published does not constitute advice, or a solicitation, or a recommendation to a transaction in any financial instrument. ADSS accepts no responsibility for any use of the content presented and any consequences of that use. No representation or warranty is given as to the completeness of this information. Anyone acting on the information provided does so at their own risk.