Forex Today: Markets Expecting 0.75% Fed Rate Hike

Adam Lemon

Risk-off sentiment continues to drive stocks lower and the dollar higher ahead of today’s Federal Reserve meeting which is strongly expected to implement a rate hike of 0.75%.

  

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  1. Markets have continued with the dominant theme of a strong US Dollar and weaker stock markets ahead of today’s Federal Reserve decision on rates and release of its updated economic forecast. The market sees an approximately 80% chance of a third successive 0.75% rate hike and a 20% chance of a hike by a full 1%. If the hike is 1%, the Dollar can be expected to rise strongly and stocks to fall sharply, while the converse will be true if the hike is only 50%.
  2. Stock markets are down almost everywhere. US markets fell yesterday, and major Asian indices have fallen more steeply during the current session, with both the Nikkei 225 Index and the Hang Seng Index down by more than 1% on the day.
  3. In the Forex market, the US Dollar is continuing to gain, and is close to its multi-year high made earlier this month. The most interesting currencies right now are the very weak New Zealand, Australian, and Canadian Dollars (the commodity currencies), which have reached new multi-year lows yesterday against the greenback. The NZD/USD currency pair reached a low of $0.5883 while the USD/CAD currency pair hit $1.3376, while the AUD/USD currency pair traded as low $0.6665 as at the time of writing.
  4. Both the 2-Year and 10-Year US Treasury Yields hit multi-year highs yesterday, with the 2-Year yield hitting 3.99%, just a whisker off the key 4% handle.
  5. Canadian CPI (inflation) data released yesterday showed a price deflation of 0.3% month-on-month, stronger than the expected deflation of 0.1%. This gives some hope that inflation may have already peaked.
  6. The Bank of Japan will release its Monetary Policy Assessment and Policy Rate later today. This might lead to volatility in the Japanese Yen.
  7. Daily new coronavirus cases globally dropped last week for the ninth consecutive week, giving rise to the hope that the pandemic is finally over in any meaningful sense. Earlier this week, President Biden declared the pandemic “over”.
  8. It is estimated that 67.9% of the world’s population has received at least one dose of a coronavirus vaccination, while approximately 7.8% of the global population is confirmed to have contracted the virus at some time, although the true number is highly likely to be much larger.  
  9. Total confirmed new coronavirus cases worldwide stand at over 618 million with an average case fatality rate of 1.06%.  
  10. The rate of new coronavirus infections appears to now be significantly increasing only in Slovakia, Taiwan, and Russia.  
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.
Learn more from Adam in his free lessons at FX Academy

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