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Markets Today 16th June 2022

MARKET WRAP – 16th June 2022

  • The Federal Reserve approved the largest interest rate increase since 1994 and signaled it would continue lifting rates this year at the most rapid pace in decades as it races to slow the economy and combat inflation that is running at a 40-year high.

 

  • The Aussie dollar traded up as high as a .70246 after the interest rate decision up more than 1c before the announcement took place.  “I do not expect moves of this size to be common,” Fed Chairman Jerome Powell said at a press conference on Wednesday afternoon. The decision at the Fed’s next meeting in late July “could well be about a decision between 50 and 75 basis points, he added.

 

  • Officials agreed to a 0.75-percentage-point rate rise at their two-day policy meeting that concluded Wednesday, which will increase the Fed’s benchmark federal-funds rate to a range between 1.5% and 1.75%.

 

  • The S&P 500 rose 54.51 points, or 1.5%, to 3789.99, snapping a five-day losing streak. The Dow Jones Industrial Average added 303.70 points, or 1%, to 30668.53, and the Nasdaq Composite rose 270.81 points, or 2.5%, to 11099.15.
  • The projections showed officials see the rate rising to around 3.75% by the end of 2023, up from the 2.75% rate that officials had penciled in during similar projections in March. Officials project reducing rates slightly in 2024.

 

  • The US 10-year yield was down 8.8 basis points to 3.4% after touching its highest level in more than a decade Tuesday.

 

  • In geo-political news, headlines indicated that Putin and Xi had spoken and had discussed economic and trade co-operation as well as the situation in Ukraine as well as “military-technical ties”

 

FX

  • US Dollar Index (DXY) bulls take a breather after refreshing a two-decade top.  Central banks are in the eye of the storm amid global stubbornly high inflation. The US Federal Reserve was the star of the day. The central bank hiked rates by 75 bps, the most significant hike since 1994, but dismissed the chances of a 100 bps hike. Chief Powell said it was the current pace of hikes is appropriate and that it could be either 50 or 75 bps in the next meeting, adding they are “front-loading.”

 

  • EUR/USD edged higher and rose above 1.0450 after having declined with the initial reaction to the Fed’s 75 basis points rate hike. FOMC Chairman Powell said the next rate hike could either be 50 or 75 bps, causing the greenback to lose interest.

 

  • GBP/USD has regathered its bullish momentum and climbed to the 1.2200 area. FOMC Chairman Jerome Powell’s comments about future rate hikes seem to have weighed on the dollar against most major currencies.

 

  • The USD/JPY dropped below 134.00 and hit a fresh daily low at 133.78 as Fed Chair Powell delivered initial remarks at the press conference following the FOMC meeting. The central bank raised the key interest rate by 75 basis points.
                        

                                           TODAY’S KEY RISK EVENTS

  • Unemployment rates for the month of May will be in focus in Australia as we await data at 11:30am that will show the strength of the job market.  BoE have their interest rate decision at 9pm tonight and we expect there to be volatility in AUD/GBP off the back of the announcement and guidance.

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CURRENCY/INDICIES RANGES

Currency Pair Low High
AUD/USD 0.68735 0.7025
EUR/USD 1.0359 1.0508
GBP/USD 1.1991 1.2205
USD/JPY 133.505 135.6
NZD/USD 0.62165 0.6313
USD/CAD 1.2863 1.2995
USD/CNH 6.6679 6.755
AUD/JPY 92.9 93.93
AUD/NZD 1.1058 1.1148
DXY 104.66 105.788

 

Equity Index Daily % Change Closing Level
ASX -1.3% 6601
SHANGHAI COMP 0.5% 3305
NIKKEI -1.1% 26326
FTSE 1.2% 7273
DAX 1.4% 13485
CAC 1.3% 6030
DOW JONES 1.0% 30669
S&P 500 1.5% 3790
NASDAQ 2.5% 11099
VIX -9.8% 29.49
 
     
Commodity Daily % Change Closing Level
CRUDE OIL -2.4% 116.1
ICE NAT GAS 31.2% 257.8
GOLD 0.8% 1835.1
SILVER 1.1% 21.7
SGX IRON ORE 1.5% 131.4
CMX COPPER 0.4% 419.2
ICE SUGAR -1.2% 18.6
ICE COTTON -2.3% 257.8
CBT WHEAT -0.2% 1063.5
BITCOIN 4.4% 21597.2
 
     
Rates Markets Yield Daily Change
US 2 YEAR 3.22% -21.6
US 10 YEAR 3.29% -18.7
AUST 2 YEAR 3.31% 23.2
AUST 10 YEAR 4.20% 24.5

Source – Bloomberg

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