• NZD leads, CAD lags
  • Gold up $2 to $1945
  • US 10-year yields down 3.9 bps to 3.79%
  • WTI crude down 68-cents to $68.74
  • S&P 500 up 6 points to 4377.

The Federal Reserve held rates as expected but still managed to deliver a surprise with the dot plot year-end level rising to 4.6%, above the 4.3% expected. The initial reaction was US dollar buying along with selling of risk assets and the front end of the bond market. The dollar rose 50-70 pips across the board on the spike in a move that erased the dollar selling in the run-up to the meeting.

Those levels held until the press conference but as Powell spoke traders sensed a lack of conviction on further rate hikes. He only went as far as to say the July meeting was 'live'. That helped to spark a retracement with the dollar giving back the majority of its gains. Pricing for July now only sits at 60%, which is little changed from pre-FOMC levels.

Treasury yields sent a similar signal with 2-years initially popping to 4.8% only to sag back to 4.7% in an indication that the market isn't convinced rates will stay above 5% for long.

Before the Fed decision, some medium term levels were breached as AUD/USD rose to the highest since February while the euro hit a one-month high and the pound rose to the best levels since April 2021.

Oil was also in focus as another big build in US supplies turned a rally into a slump. That spilled over into CAD and led to underperformance.