• Gold up $23 to $1831
  • US 2-year yields down 19 bps to 3.24%
  • US 10-year yields down 14 bps to 3.34%
  • WTI crude oil down $2.87 to $116.10
  • AUD leads, USD lags

The FOMC delivered a 75 basis point hike in a validation of the late-expectations (and likely leak) of a shift away from a strident endorsement of 50 earlier. Powell cited high CPI and a rise in inflation expectations as the catalysts for the shift.

Yields initially moved higher, the dollar rose and stocks fell but during the press conference that reversed. The main move came after Powell said the next decision would be between 50 and 75 basis points and that 75 bps wouldn't be common beyond that. The median Fed dot showed 3.4% at year end, which is modestly above 3.6% in the market.

The dollar sold off hard in the aftermath, similar to the previous FOMC decision. It's debatable whether that it a function of repositioning after strong recent moves or anything from Powell. I will note that the move last month dramatically unwound the next day. At the same time, everyone remembers that so the path of least resistance might be a further rebound.

Alone, the moves in the dollar were large for a single day but when compared to the past week of moves, it was a moderate retracement.

The one exception was the euro, which fell below 1.04 earlier in the day. The ECB called an emergency meeting and then only delivered a pledge to speed up a new 'anti-fragmentation' programme. The market is skeptical about what's coming and there are some late-breaking headlines saying that the scheme will come with requirements to adhere to European Commission recommendations.

FX news wrap June 15 2022