Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.

The vast majority of retail client accounts lose money when trading CFDs.

You should consider whether you can afford to take the high risk of losing your money.

Important Notice - Fraud awareness
Important Notice - Scam alert
The vast majority of retail client accounts lose money when trading CFDs.
Important Notice - Fraud awareness
Important Notice - Scam alert
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts lose money when trading CFDs. You should consider whether you can afford to take the high risk of losing your money.
Important Notice - Fraud awareness
Important Notice - Scam alert
The vast majority of retail investor accounts lose money when trading CFDs / Spread betting with this provider.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail investor accounts lose money when trading CFDs / Spread betting with this provider. You should consider whether you understand how CFDs / Spread betting work and whether you can afford to take the high risk of losing your money.
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Fed’s 75-basis point interest rate hike highest since 1994

The forex market witnessed a great shock yesterday following the extremely aggressive action of the US Federal Reserve in hiking its interest rate by 75 basis points marking the highest rate in twenty-eight years. This drastic measure became inevitable after the initial interest rate hike in May by 50 basis points had failed to cut down the inflation counts.

The consumer price index report for the just concluded month given last Friday shows a clear testimony of increasing inflation since May. The CPI came very high at 1% marking a 0.7% increase from the last data recorded at 0.3%.

Similarly, the core CPI, excluding food and energy prices, was stable at 0.6%. This means inflation focused on the most desired products: food and energy.

Another factor that testified to an increasing inflation rate was the retail sales data released yesterday. The retail sales report, which measures the number of goods and services purchased by consumers, has always been a subtle way of calculating the inflation rate. This time the Retail Sales report was the worst in six months given at -0.3%, which is a massive decline from the previous record of 0.7% and far from the forecast of 0.1%.

The above data from the retail sales report suggests that consumers couldn't buy much from retailers due to high prices due to increased inflation.

Consequently, during the Fed Economic Projections session, the Fed reserve was forced to hike its interest rate by 75 basis points yesterday, marking the highest rate increase since 1994.

What impact will the recent interest rate hike have on the market?

The recent interest rate hike will significantly impact the forex market, especially on FX, Crypto, Stocks, and Commodities.

Primarily, the interest rate hike will further strengthen the dollar index. This means we expect the DXY to break above the current resistance at 105.3 to a new all-time high above it.

Next, increasing dollar strength will discount all pairs pegged to the US dollar, including Gold, Silver, Bitcoin, Ethereum, and other cryptocurrencies.

At the moment, investors will refrain from risky assets and buy massively into the treasury yields. This will bring down the prices of most stocks until investors absorb the shock.

Finally, all currency pairs matched with the US dollar as the base currency will turn bullish for the moment. In contrast, those having the US dollar as the counter currency will fall massively. For instance, pairs such as EURUSD will likely experience more decline. In comparison, USDCAD, USDJPY, etc., will share more upsides.

Traders are advised to use a proper risk management strategy as significant volatility will definitely set into the market until the end of the month.

Last Updated: 16/06/2022

This market commentary and analysis has been prepared for ATFX by a third party for general information purposes only. Any view expressed does not constitute a personal recommendation or solicitation to buy or sell as it does not take into account your personal circumstances or objectives, and should therefore not be interpreted as financial, investment or other advice, or relied upon as such. You should therefore seek independent advice before making any investment decisions. This information has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. We aim to establish and maintain and operate effective organisational and administrative arrangements with a view to taking all reasonable steps to prevent conflicts of interest from constituting or giving rise to a material risk of damage to the interests of our clients. The market data is derived from independent sources believed to be reliable, however we make no representation or warranty of its accuracy or completeness, and accept no responsibility for any consequence of its use by recipients. Reproduction of this information, in whole or in part, is not permitted.


 

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