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Analysts at TD Securities explained, in a market wrap,  that as expected, the Fed increased interest rates 25bp for the third time this year.

Key Quotes:

“The 2018-2020 median dots were left unchanged but the distribution drifted higher, as has r*. The 2021 dot indicated an end to the rate hike cycle with some Fed officials penciling in cuts, and the policy stance is no longer seen as “accommodative”. See more details here.”

“In the aftermath of the FOMC rate decision US equities fell (S&P 500 -10pts, Dow -107pts), the yield curve bull flattened 2bp, the greenback dipped initially but finished stronger and gold finished the day down 0.5%, unchanged from pre-meeting levels.”

What We’re Watching in Markets
 
“With the FOMC out of the way, Treasuries will focus on Thursday’s 7yr note auction and Friday’s PCE data for direction. We remain long 5y5y and maintain our long 10yr Treasury vs bund position as we expect yields to remain rangebound in the near-term.”

“There were many dollar reactions to the Fed meeting, but the clear takeaway was the boost to the high-beta complex. EMs saw the biggest gains, mostly on the pullback in the US 10y while NOK and AUD led the G10. We continue to think that the path for the USD runs lower, especially against the European currencies that have more room to price out emergency stimulus. We also like fading USDJPY on the failure to hold 113.”

“Crude oil is holding firm despite lackluster inventory data, as the market is gradually acknowledging that Iranian sanctions will drive spare capacity to critical levels, which ultimately points to higher prices.”