By Samir Al Khoury
How did the financial markets move after the Fed’s decision yesterday?
The Federal Open Market Committee decided in its meeting yesterday to maintain interest rates at the levels of 5.25% and 5.50% for the fourth consecutive time, as anticipated by most analysts. However, of greater significance was the speech delivered by US Federal Reserve Chairman Jerome Powell. He conveyed his belief that the committee would not likely attain the necessary confidence in a sustained decline in inflation by the March meeting, thereby ruling out the possibility of reducing interest rates in March.
It is worth noting that after the markets were overly optimistic and expected, since the beginning of this year, more than 90% for a rate reduction in the March meeting, these bets declined, and the rate turned to less than 40% for a rate reduction.
How did Jerome Powell’s speech affect financial markets?
The major US stock indices, the Standard & Poor’s 500, the Dow Jones, the Nasdaq 100, and the Russell 2000, closed with strong losses, in addition to the rise in the VIX fear and volatility index, recording levels above 14 points.
The prices of gold, Bitcoin, and most foreign currencies also fell against the US dollar.
What about US Treasury bonds?
Short- and long-term US Treasury bond prices fell. The yield on two-year US Treasury bonds, which are more sensitive to federal monetary policy, rose.
So, who is the biggest winner?
The US dollar index is considered the biggest winner, as it recorded 103.81 points today, and it seems that the upward trend is prevailing at this stage, especially with the hint from Powell that interest rates will remain high for a longer period of time, and this is what supports the green currency more.
Technically, the marble appears to be positive for the US Dollar Index, as it is trading above the 50-day moving averages at 102.82 points and the 200-day moving averages at 103.53 points, which indicates upward momentum for the greenback, but the biggest challenge is the dollar index breaking a stubborn resistance level at 103.82 points. And then reaching and exceeding the level of 104 points.
As for the Relative Strength Index (RSI), it indicates the dollar’s upward momentum, recording 63 points, which is a level exceeding 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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