The U.S. Federal Open Market Committee announced on Wednesday that it would raise the target range for the federal funds rate to a range of 0.75%-1.00%, in line with market expectations. This is the first time the Fed has raised interest rates by 50 basis points in nearly 20 years.
In his subsequent speech, Powell acknowledged that U.S. inflation is too high and must be lowered to keep the labor market strong, but ruled out the possibility of a single 75 basis point rate hike. Powell claimed that the underlying momentum of the U.S. economy remains strong. A 50-basis-point rate hike in the next few meetings is also an option, but ruled out a 75-basis-point hike, saying a 75-basis-point hike was not worth considering.
The dollar tumbled against a basket of major currencies on Powell’s remarks. Yields on the 10-year U.S. Treasury note also fell. The market had priced in a 50% chance of raising interest rates by 75 basis points before July, so everyone was concerned about whether raising interest rates by 75 basis points was an option on the table, but Powell basically opposed this. This led to the disappointment of speculative traders.
Investors are assessing whether the U.S. dollar index has room for further gains after hitting a 20-year high last week, as much of the Fed’s hawkish stance is already priced in. The U.S. dollar index lost momentum after the Fed decision, which helped push gold prices higher. Subsequently, if some important economic data from the United States does not perform well, it will further promote a further rebound in gold.
Trading strategy deployment: it is recommended to do more at low levels.
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