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The U.S. dollar showed little change on Thursday, with the dollar index (USDX) up by 0.02%, still not far from the six-month high of 105.54 seen last week. Even though the Fed held interest rates unchanged as anticipated, in the press conference that followed, Fed president went on to comment that monetary policy is likely to be significantly tighter than initially expected in 2024 providing some support to the dollar and at the same time adding pressure on equities markets.
Another important highlight for this week was the BOJ monetary policy decision. The bank decided to keep rates unchanged at negative levels and said it will continue with its current pace of stimulus, disappointing some investors hoping for any hawkish signals. According to some market analysts, any move up from negative rates by the BOJ will mark an end to nearly a decade of easy monetary policy enjoyed by Japanese stocks. A post-meeting address by Governor Kazuo Ueda is now in focus.
Gold prices posted a noteworthy decline following the FOMC press conference on Wednesday upon which the yellow metal was trading at around $1947 per ounce. However, following the policy announcement and the press conference, the yellow metal begun to tumble until late Thursday’s where it hit a low of $1914.09. Part of the move could be attributed to strength in the dollar as well as increased demand for interest yielding assets.
Energy prices traded between gains and losses on Thursday, finally ending the session moderately higher, with WTI seeing gains of 0.60% while Brent posted a minor increase of 0.07%. Energy prices had reached 10-month highs earlier this week, supported partly by higher-than-expected supply cuts from Russia and Saudi Arabia and declining inventories.
Wall street has been steadily losing ground since last Thursday and continues to display a strong negative momentum following the Fed’s hawkish remarks. All three major U.S. indexes hit their lowest since June, as the US 500 fell by 1.59%, the US 30 was down 1.10% and the US tech 100 posted another sharp decline of 1.74%. Revised economic projections, showed interest rates will remain elevated next year, lowering hopes for easing of policy before 2025.
Key releases up ahead on Friday include Eurozone, U.K. and U.S. manufacturing and services PMI’s as well as retail sales from Canada and the U.K. In addition, several FOMC members are due to speak within the day.
The EUR/USD pair ended the session with gains of 0.10% on Thursday after hitting multi-month low earlier in the session.
The US Dollar peaked and then weakened after the release of US economic data, which showed a decline in Initial and Continuing Jobless Claims to the lowest level since January.
European Central Bank policymakers expressed differing views on Thursday. Knot mentioned that he does not expect a rate hike at the next policy meeting, while Wunsch argued that it is premature to conclude that they have reached the terminal rate.
Gold prices posted a sharp decline on Thursday ending the day with losses of 0.42% driven by a stronger U.S dollar and U.S bond yields after the Federal Reserve hardened its hawkish posture on interest rates.
The dollar climbed over a six-month peak, while benchmark 10-year Treasuries yields sat atop a 16-year high, weighing on greenback-priced bullion that bears no interest.
Oil prices traded between gains and losses after a choppy trading on Thursday, with WTI contract on iForex platform rising above $91.00 per barrel after a Russian ban on fuel exports snatched the focus from Western economic headwinds that had pushed prices down.
Russia temporarily banned exports of gasoline and diesel to all countries outside a circle of four ex-Soviet states with immediate effect to stabilize the domestic fuel market. The Fed on Wednesday maintained interest rates, but stiffened its hawkish stance, projecting a quarter-percentage-point increase to 5.50-5.75% by year-end and that could dampen economic growth and overall fuel demand.
U.S. stocks continued their retreat on Thursday as Wall Street grappled with the Federal Reserve's hawkish message alongside its decision to hold interest rates steady. U.S main indexes posted huge daily losses on Thursday with US 500 and US 30 ending the session 1.59% and 1.10% respectively while US Tech 100 ended the session 1.74% lower.
Treasury yields continued to advance after fewer than expected weekly initial jobless claims flagged ongoing strength in the labor market and the potential for a pick up inflation.
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