Forex Today: More Hawkish Fed Sends Stocks Lower

The Federal Reserve took a more hawkish tilt than had been expected in yesterday’s statement, sending stocks and other risky assets lower.

  • The US Federal Reserve yesterday confirmed that a course of rate hikes would begin soon, which had been expected. However, Jerome Powell would not give more details regarding a likely timetable, suggesting that the US interest rate could end in 2022 closer to 2% than the approximately 1% which had recently been a consensus forecast. Powell also hinted he was more concerned about inflationary prospects (“inflation risks are more to the upside”) than he was last month. Global markets have reacted by selling risky assets such as stocks, many commodities, and Bitcoin. For the third consecutive day, the benchmark S&P 500 Index has closed below its 200-day moving average, which is typically a bearish sign at the end of a bull market.
  • New Zealand’s CPI (inflation) data exceeded expectations, coming in slightly higher than expected, showing a quarterly increase of 1.4% compared to the 1.3% which had been expected. Annualized inflation stands at 5.9%, its highest level in 32 years.
  • In the Forex market, markets are clearly trading in risk-off mode following the FOMC release. The Fed’s more hawkish stance has boosted the US dollar, which along with the Japanese yen is now the strongest major currency, while the New Zealand dollar is the weakest. This trend may last some time as there are no data releases close which are likely to reverse the risk-off market sentiment.

  • Major cryptocurrencies are selling off, but not very strongly. Bitcoin and Ethereum are again trading below recent pivotal levels. This suggests short trades in crypto are more attractive than longs in the near future.
  • In the commodities markets, WTI Crude Oil is taking a dip, but several agricultural commodities such as corn, soybeans, and cotton remain bullish.
  • Daily new coronavirus cases soared to a new global record at the end of last week, with more than 3.7 million new cases recorded for the first time.
  • Data suggests that the globally rampant omicron coronavirus variant, while considerably more infectious, has notably milder effects than previous coronavirus strains, with an estimated 70% reduction in the probability of hospitalization. This is potentially very good news for both health and economy. Pfizer have announced they plan to have an omicron-specific vaccine ready in March.
  • It is estimated that 60.7% of the world’s population has received at least one dose of a coronavirus vaccination.
  • Total confirmed new coronavirus cases worldwide stand at over 363.2 million with an average case fatality rate of 1.55%.
  • The rate of new coronavirus infections appears to now be increasing most quickly in Algeria, Andorra, Armenia, Austria, Bahrain, Bangladesh, Barbados, Belarus, Belgium, Belize, Bhutan, Brazil, Bulgaria, Chile, Croatia, Cuba, Czech Republic, Denmark, Egypt, Estonia, France, Georgia, Germany, Guatemala, Hungary, Iraq, Israel, Japan, Jordan, Kazakhstan, South Korea, Kosovo, Kuwait, Latvia, Liechtenstein, Lithuania, Luxembourg, Mexico, Moldova, Mongolia, Nepal, Netherlands, North Macedonia, Norway, Oman, Pakistan, Paraguay, Peru, Poland, Portugal, Romania, Russia, Serbia, Singapore, Slovakia, Slovenia, Sweden, Switzerland, Thailand, Trinidad, the UAE, Ukraine, and Uruguay.
Adam Lemon

Adam Lemon began his role at DailyForex in 2013 when he was brought in as an in-house Chief Analyst. Adam trades Forex, stocks and other instruments in his own account. Adam believes that it is very possible for retail traders/investors to secure a positive return over time provided they limit their risks, follow trends, and persevere through short-term losing streaks – provided only reputable brokerages are used. He has previously worked within financial markets over a 12-year period, including 6 years with Merrill Lynch.