US stocks pump and dump on FOMC, Powell and Yellen comments

US equities finished in the red in Wednesdays session , the session was volatile with some big moves in all risk assets which was unsurprising with probably the most important FOMC meeting we’ve had in the last 12 months.

The FOMC hiked rates 25bp as expected, there was an initial rally in equities and drop in the USD as the accompanying statement was seen as dovish for rate hikes going forward, with the big change in language being “further rate hikes will be appropriate” to “further rate hikes may be appropriate” this saw a sharp drop in the US dollar and spike in equities.

It didn’t last long though, as has happened in previous meetings the Powell presser where he emphasised that further progress on inflation was still needed and the Committee was prepared to do more on rates if needed and that rate cuts are not likely this year. Another factor was Treasury Secretary Janet Yellen making comments at the same time that the treasury is not considering expanding its deposit insurance facility.

This saw a dramatic turnaround in US equities, with banks leading the charge lower dragging all major indexes solidly into the red, with the Dow Jones down over 500 points.

The reaction in the USD was also swift, AUDUSD giving all it’s gains , while the Euro, after spiking above 1.09 pulled back significantly to the 1.0850 level.

Gold gained strongly, moving up around 30$ an ounce and recouping most of yesterdays losses, it had an initial spike on USD weakness after the FOMC, but held it’s gains better than other FX as Yellens comments regarding deposits saw a flight to safety in the precious metal.

WTI oil rallied , briefly getting above 70$ a barrel on reports that OPEC+ was likely to stay the course on 2mln BPD production cuts until the end of 2023.

Later today, more Central bank action with both the Bank of England who is expected to hike 25bp and SNB . a 50bp hike expected . Again most the action will be on the statements released with the rate decisions, so any CHF or GBP traders be prepared.