Morning Minutes

US Dollar Soars on Fed Hawkish Hold




World markets have been rocked by the results of yesterday’s Fed meeting. The US central bank held its benchmark Fed Funds rate at 5.50% as had been widely anticipated. Forecasts of interest rates for 2024 and beyond were more hawkish than expected.  FOMC members maintained their forecast calling for one more rate hike this year, likely in November to continue an every-other-meeting pace. For 2024 Fed members were less dovish, forecasting 0.5% of rate cuts compared with their June forecast of 1.0% in rate cuts for 2024, meaning they appear set to keep interest rates higher for longer. FOMC members raised their GDP forecasts for 2023 and 2024 and left their inflation forecasts essentially unchanged.

This “hawkish hold” has sparked a big rally in US treasury yields (the 10-year has climbed up toward 4.45% this morning) and in the US Dollar, sending other assets spiraling downward. In currency action, Gold is down 1.4%, Bitcoin is down 0.8%, and the Canadian Dollar is down 0.35%. Commodities are also under pressure this morning with Copper dropping 2.8% and WTI Crude Oil falling back under $90.00/bbl with a 0.5% decline.

The Fed has overshadowed what was otherwise relatively dovish news from some European central banks this morning. Both the Bank of England and the Swiss National Bank had been expected to announce 0.25% rate hikes but held the line instead. This means that every major central bank who held a meeting this month declined to raise rates meaning that even though rates may remain at an elevated level for longer, the heavy lifting of rate hikes appears close to being done. The British Pound is down 0.7% and the Swiss Franc is down 0.8% on these relatively dovish developments.

Stock markets are also under pressure this morning. US Index Futures are down 0.6%-1.1% adding to yesterday’s losses of 0.2% to 1.5% with the NASDAQ leading the way downward both times. European markets are also sliding with the Dax down 1.25% and the FTSE down 0.3%.

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

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