The NZD is the strongest and the USD is the weakest

The NZD is the strongest and the USD is the weakest as the North American session begins. The flow of funds suggests a "risk on" scenario with the CHF also moving lower.

The USD's move lower comes the day-after the Federal Reserve raise rates by 25 basis points to 5.0% and guided for one more hike in 2024. The terminal rate in the Fed's dot plot remained unchanged for 2023 a 5.1% (vs the December forecast). For 2024 the Fed now sees a terminal rate of 4.3% up from 4.1%. The central tendencies showed the Fed now expects PCE headline inflation for 2023 rising to 3.3% from 3.1%, and the core to remain above 2% to 3.6% up from 3.5% from December's estimate. They see the unemployment rate moving up to 4.5%. That is lower than the 4.6% guided in December, but higher than the current rate of 3.6%. The GDP is expected to come in at a tepid 0.4% in 2023. The Fed chair guided toward data dependency.

Overall yesterday, the US dollar move lower and stocks also move lower. Today we are seeing that continuation to the downside in the US dollar albeit at a slower pace. Stocks have also rebounded in the US.

The Bank of England just raised rates by 25 basis points to 4.25%. The GBPUSD moved higher initially but has since come back down and trades above and below the 1.2300 level. The high price for the GBPUSD spiked up to 1.2329 before rotating to the downside.

A snapshot of the markets currently shows:

  • spot gold is trading up $8.52 or 0.43% at $1978.43
  • spot silver is trading down five cents or -0.23% at $22.88
  • WTI crude oil is trading at $70.34. Traders hi $71.31 yesterday. The high price today reached $70.79 while the low extended to $69.84
  • Bitcoin is below the $28,000 level at $27,696

In the premarket for US stocks, the major indices are trading modestly higher after yesterday's sharp declines.

  • Dow Industrial Average is up 57 points after yesterday's -530.49 point decline
  • S&P index up 18 point after yesterday's -65.88 point decline
  • NASDAQ index up 119 points after yesterday's -190.15 point decline

European equity markets are moving lower:

  • German DAX -0.50%
  • Frances CAC -0.38%
  • UK's FTSE 100 -0.90%
  • Spain's Ibex -0.51%

Looking at the US yield curve, the two year yield is remaining below the 4.0% level. Other yields are modestly lower:

  • 2 year yield 3.965%, -1.6 basis points
  • 5 year yield 3.535% -0.4 basis points
  • 10 year yield 3.475% -2.5 basis points
  • 30 year yield 3.687% -1.0 basis points

In the European debt market, the benchmark 10 year yields are also moving lower as they catch up to the declines seen yesterday afternoon in New York

European benchmark 10 year yields are lower