The Dollar Falls on the Fed, But Still it Shows Signs of Recovery
The US Federal Reserve boosted interest rates by 25 basis points, as predicted. As the Federal Reserve attempts to strike a balance between rising inflation and banking turbulence, the end of the tightening cycle is approaching.
Markets soared on the news but subsequently reversed, aided by remarks from US Treasury Secretary Janet Yellen. She stated that "blanket insurance" for bank deposits is not being considered.
On Wednesday, US rates fell, with the 10-year falling to 3.43% and the 2-year sliding to 3.92%. The US Dollar Index fell 0.65% for the sixth day in a row. Although touching weekly lows versus the majority of its rivals, the dollar closed far above the lows, indicating some hopeful indicators.
Volatility in the currency markets is expected to remain excessive, which may spark a broad-based rebound or drive the US dollar to new lows. The Japanese yen was among the best performers, aided by a drop in US rates. USD/JPY closed below 131.50 for the second time in a month.
The Euro climbed across the board, helped by remarks from European Central Bank (ECB) officials indicating that if the financial crisis eases, additional rate rises are likely. The combination of a lower US dollar following the FOMC meeting and a strong Euro led EUR/USD to 1.0911, the highest level since February 2, before falling to 1.0860.
Thursday is the most probable day for the Monetary Policy Committee to meet, according to the Monetary Policy Committee. The average forecast is for a 25 basis point hike, especially after inflation unexpectedly surged in February, with the annual rate jumping to 10.4%. GBP/USD rose beyond 1.2300 on Wednesday but settled around 1.2260. It has a positive tilt but is unable to consolidate over 1.2300.
USD/CHF fell below 0.9200 for the first time in a week. On Thursday, the Swiss National Bank (SNB) will publish its monetary policy decision, with market investors anticipating a rate rise of 50 basis points to 1.50%.
The drop in Wall Street equities prices impacted commodity currencies. The AUD/USD pair rapidly reversed from 0.6759 to 0.6680, the NZD/USD pair touched 0.6300 and finished closer to 0.6200, and the USD/CAD pair soared down to 1.3655, only to finish the day higher than 1.3730. At the time, stocks are driving the direction of the pairings.
Bitcoin dropped from $28,800 to $27,700 following the Fed meeting. Gold and silver prices rose as a result of lower US rates. After reaching weekly highs, crude oil prices closed nearly flat.