The US FOMC announced an interest rate hike of 75bp as expected by the market. The statement added that “considering cumulative tightening and associated delays” when determining the appropriate pace of rate hikes to make policy sufficiently restrictive. This was associated with a slowdown in the pace of interest rate hikes in the future, and there was a dollar-selling reaction. On the other hand, at Fed Chairman Powell’s briefing, “The final interest rate level was higher than previously expected. The time to slow rate hikes could come as soon as the next meeting. It is too early to think about stopping rate hikes.” comment. The dollar was bought back as the possibility of raising the so-called terminal rate level was indicated.
The market was sensitive to the strength and weakness. Although the dollar index oscillated, it eventually tilted in the direction of dollar appreciation and continues to this day. Current CME FedWatch shows a 50 basis point rate hike at the next December meeting rising to 61.5% and a 75 basis point hike dropping to 38.5%. However, given that the end point for rate hikes has been shown to be higher than expected, the pace of rate hikes will continue to depend on the data to what extent. I’d like to check tomorrow’s US employment statistics and the results of the US consumer price index on the 10th.
The results of the UK Monetary Policy Committee (MPC) will be announced today. A rate hike of 75 basis points is likely. It is still unclear how far the British CPI will rise, and it is expected that the Fed will implement a further significant rate hike after two consecutive 50bp hikes. However, concerns about an economic recession have become a reality, and it is likely that the pace of interest rate hikes will be eased in the future, just like in the United States. The strength and weakness in this area will be shown in the split of votes among the members regarding the extent of the rate hike. There is also likely to be a mention of the sale of bonds (QT), which finally started on November 1st. This time it’s Super Thursday, and the economic outlook and Bank of England Governor Bailey’s press conference are also scheduled.
The dollar-yen exchange rate is a mixture of dollar-buying and yen-buying, and is hovering around the 147 yen level. The possibility that the final level of the US interest rate hike was raised is a negative factor for the stock market, and it is putting pressure on the yen to appreciate against risk. On the other hand, US bond yields are rising, putting pressure on the dollar.
(Source: Minkabu)
In the end, Chairman Powell’s remarks returned the US dollar to a strong one. However, since the pace of interest rate hikes is slowing down, it is assumed that US dollar buying will be strong, but it will be difficult for the market to rise as high as before.
First of all, I would like to see how the ups and downs from yesterday will calm down.
