Fed hikes rates by 25 points – will the dollar keep falling?

As anticipated, the Federal Reserve increased its interest rates by 25 basis points to a range of 4.5-4.75% during its first meeting held in 2023. As FOMC Chair Jerome Powell remarks on the policy outlook, the US dollar remains under negative pressure.

In turbulent trading, US stock indexes were down on Wednesday, rebounding from session lows reached after the Federal Reserve hiked rates by 25 basis points. Fed stated that it anticipates continuing rises in lending rates as it continues to combat excessive inflation. Powell also stated the terminal rate could be as high as 4.9%.

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Fed replaced a language to the “pace” of future rate rises with a remark to the “extent” of rate adjustments in its statement. This is implying that future rate hikes would likely occur in quarter-point increments.

After quick rises in 2022 intended at reducing decades-high inflation, the magnitude of the increase for the first meeting of the year was consistent with forecasts. After an immediate fall across the main US indicies, Dow Jones bounced back to a green close up by 0.3%. S&P 500 followed 1.26% to the green, while Nasdaq posted a green 2.2% rise. All of the indicies turned around more than 1.5%.

Dovish Fed is not good for the US dollar

The EUR/USD has surged as the market reacts positively to the Federal Reserve’s dovish stance, despite inflation still being somewhat high. However, the chairman of the Federal Reserve is talking to the media, and he has not provided a schedule for a pivot, with further rate rises planned before a break “to get the job done.”

EUR/USD posted a close near 1.1000 which is a 1.3% raise. This is a level level last seen in April. USD/JPY is falling quickly and closing below the crucial 129 mark with more than 1% of a decline to the red.

Thanks to the Fed meeting today, AUD/USD put an end to three days of losses and posted a green ending at 0.7136 with a 1.16% rise in the green. GBP/USD followed the US dollar’s rivals into the green zone 0.42%.

Crude bulls strugglled for power

Oil prices dropped about 3% in response to a sixth consecutive weekly increase in US inventories and OPEC+’s decision to maintain output levels on the assumption that demand from China would increase.

WTI, crude futures for March finished lower by $2.46, or 3.1%, to $76.41 a barrel. The low of the session was $76.06. Brent oil for March delivery finished lower by $2.62, or 3%, at $82.84 following a daily low of $82.86.

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Gas futures continued to fall on Wednesday as bears maintained their stranglehold on the market. The March gas contract on the Henry Hub finished lower by 8%, at $2.468 per million British thermal units (mmBtu).