By Samir Al Khoury,
The Federal Open Market Committee (FOMC) decided in its meeting yesterday to maintain interest rates at 5.25% and 5.50%, a move anticipated by most analysts. However, the more significant news was the dot plot expectations, which indicated a rate cut of 25 basis points this year, in contrast to the three cuts expected back in March. Looking ahead to 2025, the Fed anticipates four interest rate cuts.
Notably, inflation has slowed in the United States. The headline consumer price index (CPI) recorded an annual rate of 3.3% yesterday, lower than both the expectations and the previous reading of 3.4%. Similarly, the core CPI, which excludes food and energy, registered an annual rate of 3.4%, below the expected 3.5% and the prior reading of 3.6%.
How Did the Dot Plot Forecasts and Jerome Powell’s Speech Affect Financial Markets?
Major US stock indices, including the S&P 500, Dow Jones, Nasdaq 100, and Russell 2000, closed with strong gains. Additionally, the VIX Fear and Volatility Index declined to 11.94 points, signaling stability and investor satisfaction in US stock markets. Gold, Bitcoin, and most foreign currencies also rose against the US dollar.
What About US Treasury Bonds?
Prices of both short-term and long-term US Treasury bonds rose significantly. The yield on two-year US Treasury bonds decreased to 4.67%, its lowest level since April 5, 2024. Similarly, the yield on 10-year US Treasury bonds fell to 4.25%, its lowest since April 1, 2024.
So, Who Is the Biggest Loser?
The US dollar index emerged as the biggest loser, recording 104.25 points yesterday and currently hovering near 104.75 points. Technically, it appears that a consolidation trend is prevailing for the US Dollar Index at this stage, as it trades around the 104 to 105 points range. The biggest challenge lies in breaching the 50-day moving average, which stands at 105.11 points. Meanwhile, the Relative Strength Index (RSI) indicates neutrality for the dollar index, recording 50 points.
Please note that this analysis is provided for informational purposes only and should not be considered as investment advice.
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