USDJPY BUY
The Fed just hiked rates by 50 basis points for the first time in over 20 years. But, in a display of the importance of expectations, stocks launched higher with the S&P 500 putting in its strongest rally in two years on the back of the move. And, along with that, the US Dollar dropped down for a test at a fresh swing-low.
The reason for the move is related to the building expectations for a 75 basis point hike in June that markets had been building in. So, this comes down to a question of just how aggressive the Fed wants to be in addressing inflation. If going by verbiage from various Fed members in the lead-up to yesterday’s hike, it really seemed as though most members of the bank were moving closer to desperation in looking to temper inflation. And coming into yesterday’s rate decision, a 50 basis point move in May was well baked-in, meaning that we probably weren’t going to see a shock move of a 75 basis point move there.
But – given the persistence of inflation, the door was opening to some type of communication from Chair Powell that such a move might be on the table for next month. It was when he ruled this out in the presser that markets really began to fly, with the S&P 500 jumping up to fresh highs as the US Dollar backed down.
The reason for the move is related to the building expectations for a 75 basis point hike in June that markets had been building in. So, this comes down to a question of just how aggressive the Fed wants to be in addressing inflation. If going by verbiage from various Fed members in the lead-up to yesterday’s hike, it really seemed as though most members of the bank were moving closer to desperation in looking to temper inflation. And coming into yesterday’s rate decision, a 50 basis point move in May was well baked-in, meaning that we probably weren’t going to see a shock move of a 75 basis point move there.
But – given the persistence of inflation, the door was opening to some type of communication from Chair Powell that such a move might be on the table for next month. It was when he ruled this out in the presser that markets really began to fly, with the S&P 500 jumping up to fresh highs as the US Dollar backed down.
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