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FED policy and Market reactions

FED policy and Market reactions

The Federal Open Market Committee (FOMC) left the interest rate unchanged in the range of 0% to 0.25% and will continue its monthly bond purchase of $120 billion. FED appears they have no plan to hike rates and tight the monetary policy any time soon. Current rates will probably continue through 2023.

The effects of this announcement pushed the Dollar lower. The dollar gained on Thursday but fell near a two-week low after the FOMC statement, following a very positive economic outlook. The Fed expects that the U.S. economy will grow by 6.5% this year - the largest annual economic growth since 1984 - thanks to massive stimulate packages and great progress of coronavirus vaccines.

Meanwhile, U.S. Treasury yields held on the more-than-one-year high. Dow Jones and SP500 both printed new high records and helped the Asian and European markets grow.

Market Reaction:

USD Index: Positive economic outlook will decrease the market risk. As we can see, VIX fell under 23 last night. Lower risk means less demand of USD-Safe haven, and Weaker USD pushed the Gold to its two weeks high above 1,750. While the US positive outlook with FED continuing bond purchase program will push the stock market higher, NASDAQ will be under pressure since cash flow will move to riskier and physical assets than digital.

We expect a correction for all of the mentioned assets for today and after last night's sharp moves, and then the market will be more realistic and away from emotion to make a correct decision.

Today calendar:

Today everything will be about BoE monetary policy and interest rate decision. However, as every Thursday, the US season will get the attention for weekly initially jobless numbers. Also, ECB speakers, Deutsche Bank, and FED will get more attention to getting more information from the central bank's detailed policy.

FED policy and Market reactions
Details
Author
Ahura Chalki
Publish date
25/11/23

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