Fed chair Powell sets tone with first policymaking meeting

Dollar slips after Fed decision, trade worries shackle shares. The US central bank raised the target range for the federal funds rate to 1.5-1.75% as it predicted inflation would accelerate in the coming months. The overall message was hawkish, projections indicated there would be three rate increases this year, against some forecasts of four. Instead, the Fed pointed to an extra increase in 2019 with more tightening in 2020.

Wall Street stock indexes ended the day lower, with the S&P 500 (SPX) losing 0.18% despite a boost from sharp gains in energy shares (SPNY) on rising oil prices. The Nasdaq (IXIC) dropped 0.26% with Apple (O:AAPL) falling below its 100-day average even as Facebook (O:FB) bounced back after two days of steep losses amid a controversy over outside exploitation of its users’ data.

That pushed the USD lower in the currency market, with the dollar index (DXY) (=USD) testing this month’s low after posting its biggest fall in two months on Wednesday.

EUR gained 0.2% to $1.2363, extending its recovery from a near three-week low of $1.2240 touched earlier in the week.

USD shed up to 0.4% to 105.58 JPY , turning down on the week to edge closer to the 16-month low of 105.24 hit on March 2. It last stood at 105.91 yen.

GBP pound hit a 1 1/2-month high of $1.4171, building on Wednesday’s one-percent gains. Strong British wage data published on Wednesday cemented expectations that the Bank of England was likely to signal a May rate hike after its monetary policy meeting later in the day.

Following the Fed’s move, the People’s Bank of China gingerly raised the seven-day reverse repo rate, a key short-term interest rate, by 5 basis points, to prevent U.S.-China rate differential from getting too wide.

Sources

https://www.ft.com/video/87ca55bb-fae7-40b6-97d9-8c55d8243780

https://www.ft.com/content/8bd77102-2d4e-11e8-a34a-7e7563b0b0f4

https://www.ft.com/content/332d2e56-57b6-4d6b-8c49-ae8584679154

https://www.ft.com/content/45811dbc-2d93-11e8-9b4b-bc4b9f08f381

https://uk.investing.com/news/stock-market-news/dollar-on-defensive-after-fed-trade-worries-nag-shares-1089564

https://uk.investing.com/news/economy-news/us-set-for-china-tariffs-by-friday-as-trade-diplomat-says-has-tools-1088907

https://uk.investing.com/news/economic-indicators/uk-wage-growth-near-twoandahalf-year-high-boosting-chances-of-bank-of-england-rate-hike-1088073

https://www.fxstreet.com/news/us-dollar-tumbles-to-lows-near-8940-on-fomc-trade-201803220813