Volatility will remain elevated on Wednesday after a sharp drop in Wall Street stock prices and large swings in the forex market. Despite the takeover of First Republic Bank, bank worries persist due to the sale of shares by two regional banks. The key event happening on Wednesday will be the Federal Reserve decision. Market participants expect a rate hike of 25 basis points. Attention will focus on President Powell’s statement and press briefing.
Despite aversion, the US Dollar index failed to grip gains and turned negative during the US session. DXY fell from a three-week high below 102.00, fueled by rising US Treasury bond. The US 10-year yield declined more than 4% and stabilized at 3.42%, while the 2-year yield declined below 4%. The move began following the release of US data among rising expectations of Fed rate cuts in the fourth quarter.
The two-day FOMC meeting ends on Wednesday, and the Fed is expected to hike the federal stake rate by 25 basis points to between 5% and 5.25%. This increase corresponds to the maximum rate of 2007. There will be no updated predictions. Market participants will focus on the statement followed by President Powell’s press briefing. Before the Fed’s decision, ADP will exonerate its private payrolls report.
Forex Market Technical Analysis
EUR/USD rallied strongly during the US session, moving to 1.1000 from weekly lows below 1.0950. Eurozone inflation data came in slightly better than expected in April, with core inflation at 5.6% yearly.
The Aussie did better at first but weakened and left its gains behind. AUD/USD temporarily traded above 0.6700 before falling back to 0.6665. the couple’s prospects have improved, but not dramatically.
NZD/USD continued higher to 0.6200. the Kiwi outperformed as the AUD/NZD erased all RBA gains falling to 1.0735 from 1.0835. Wednesday will be an engaging day with the Reserve Bank of New Zealand Financial Stability Report and the New Zealand employment report.
The Loonie slumped across the board as USD/CAD rebounded to 1.3630 from 100-day SMA at 1.3530. a 5% fall in oil prices impacted the CAD. Gloomy prospects for global growth are putting pressure on oil.
Falling US yields boosted Gold prices, which surged to $2,020 an ounce and hit its highest daily close in three weeks.