Americans celebrate Thanksgiving today, which may translate into less activity for investors overseas. However, before that happens, the market seems to be still alive with yesterday's "minutes" from the latest FOMC meeting.
The minutes are a record of events and statements at the meeting of the Federal Open Market Committee, which makes decisions on interest rates in the United States. They show that the vast majority of Fed officials felt that a slowdown in the rate of increase in the federal funds rate would probably be appropriate soon, as this would allow the Committee to better assess progress toward achieving its goals of maximum employment and price stability. Policymakers also noted that with inflation showing no signs of abating and the economy's supply-demand imbalance persisting, the ultimate level of the federal funds rate that would be needed to achieve the Committee's goals is somewhat higher than they had previously expected.
The Federal Reserve raised the target range for the federal funds rate by 75 basis points to 3.75%-4% at its November 2022 meeting, marking the sixth consecutive rate hike and the fourth consecutive 75bp increase. As a result, the cost of dollar funding has risen to its highest level since 2008, Tradingecnomics calculated.
Slower hikes - how are the dollar exchange rate and indexes reacting?
The dollar index fell below 106 points on Thursday morning, slipping for the third day in a row toward the lowest levels since mid-August. For the week as a whole, the dollar seems to have lost to all major world currencies. Meanwhile, the British pound was able to record the biggest strengthening, gaining more than 1.7 percent, followed by the New Zealand dollar, which saw a historic interest rate hike yesterday. In third place on a weekly basis is the Swiss franc, with a strengthening of about 1.5 percent. Thus, it seems that the dollar's rally after the US interest rate hike may have slowed or come to an end, and now the market could at least move to a larger correction in price and time after the USD's one-year appreciation.
Source: Conotoxia MT5, USDIndex, Daily
The chances of a slower pace of interest rate hikes may have appealed to investors on Wall Street, where the green has taken hold. Particular attention may be paid to the Dow Jones index, which is now just a few percent short of reaching new highs. Yesterday, the Dow closed more than 100 points higher, while the S&P 500 and Nasdaq rose 0.6% and 1%, respectively. For the month as a whole, Caterpillar posted the biggest gains in the 30-company index, rising more than 23 percent, while the shares of aircraft manufacturer Boeing achieved a similar result. Meanwhile, only three companies in the entire index recorded a decline. They were UnitedHealth Group, The Walt Disney Co and Salesforce.com Inc. In their case, the declines were in the range of -2.2 to -5.2%, according to data from the BBN service.
Source: Conotoxia MT5, Caterpillar, Weekly
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service)
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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