After the much-anticipated 25-basis-point interest rate hike announced by the Fed, many market participants believe that the market had already priced in this outcome. As a result, the stock market did not react significantly to the news, and major asset classes continued to consolidate.
$E-mini Nasdaq 100 - main 2309(NQmain)$ US stock market took rally instead on FOMC decision.
1. Dollar $USD Index(USDindex.FOREX)$ falls after Fed rate hike
Following a continuous decline, the U.S. dollar index rebounded from 99.54 and reached a high of 101.65 before retracing slightly. The dollar's rebound was one of the contributing factors to the recent pullback in the U.S. stock market.
"His confidence that a soft landing is very possible even while leaving the door equally open to more hikes or a hold on rates sent the dollar lower and equity markets higher," said John Velis, head of Americas macro strategy, BNY Mellon Markets in New York.
2. Gold $Gold - main 2308(GCmain)$ rally might encounter pressure
25-basis-point rate hike by the Fed, along with the indication that no further rate cuts are expected this year, put some pressure on gold prices, which saw a modest increase of 0.5%.
3. US Treasury yields dipped $10-YR T-NOTE - main 2309(ZNmain)$
The benchmark 10-year U.S. Treasury yield fell to 3.850%, while the 2-year U.S. Treasury yield declined to 4.825%.
Matthew Hornbach, Chief Interest Rate Strategist at Morgan Stanley, mentioned that the sustainability of the bond market's rebound would increasingly depend on inflation prospects, as the robustness of the U.S. labor market data plays a role.
He also emphasized that it might be an opportune time to position for long-term U.S. Treasuries due to the potential sharp decline in inflation later in the year, combined with increased downside economic risks.
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