The Dollar Falls After the Fed’s Interest Rate Decision

market news summary

The Federal Reserve raised interest rates by 25 basis points today on Wednesday, March 22, to 5% levels. This means the Fed raised interest rates for the ninth time in a row, to the highest level since 2007.

According to the Federal Reserve’s expectations, the real gross domestic product will grow by 0.4% in 2023, while unemployment is expected to reach 4.5% and inflation at 3.3% this year.

US indices closed collectively lower in Wednesday’s session, following the Fed’s decision to raise interest rates by 25 basis points, and the Fed’s president’s expectations not to cut rates this year.

FOMC members also stated in the Fed statement that some additional tightening might be possible but indicated that it is about to halt future increases in light of the recent turmoil in the financial sector.

The Nasdaq index fell by 1.6% in Wednesday’s session, and the US regional banking index fell by more than 5%, to close near its lowest level in more than two years.

The S&P 500 index fell by 1.7% to lose 4,000 points, but managed to stay above the 200-day moving average.

Dollar index (USDX)

The US dollar continued its weak performance, extending its series of declines for the sixth day, after the decision to raise the federal interest rate by only 25 basis points. Moreover, the two-year Treasury yields fell by about seven basis points, after declining by 23 basis points on Wednesday.

Pivot Point: 102.25

Spot Gold (XAUUSD)

Gold prices rose at the settlement of yesterday’s trading session, March 22, to return and trade above $1980 an ounce.

The Fed expects the final interest rate in the current monetary tightening cycle to be 4.3%, compared to the previous estimate of 4.1%.

Pivot Point: 1,960

Dow Jones Index (DJ30ft – US30)

The Dow Jones index fell by 1.6%, or the equivalent of 530 points, recording the largest daily loss in a week.

The Dow Jones closed below the 200-day moving average in Wednesday’s session.

The main sectors recorded a collective decline, led by the industrial sector, which declined by more than 3%.

Pivot Point: 32500

US Crude (USOUSD)

Oil prices fell on Thursday, March 23, following three sessions of gains, after US Federal Reserve Chairman Jerome Powell renewed his commitment to curbing inflation, including the possibility of raising interest rates again.   

Brent crude futures fell 80 cents, or 1%, to $75.89 a barrel, and West Texas Intermediate crude futures fell 84 cents, or 1.2%, to $70.06 a barrel.      

Both crudes reached their highest closing levels since March 14, in yesterday’s settlement.

Yesterday, Powell said that pressures in the banking sector could lead to a credit crunch, with “clear” repercussions for the US economy, which officials at the US central bank expect to slow more than expected this year.

The crisis in US banks caused fluctuations in the trading of risky assets such as oil during the past week, with investors anticipating the US Central Bank’s decision to raise interest rates on Wednesday.

Pivot Point: 70.00