- Moving the markets
The Fed offered no surprise and followed the expected theme of hiking rates by only 0.25% with more to come. A mid-day sell-off reversed with traders focusing on chairman Powell’s acknowledgement of falling inflation:
We can now say for the first time that the disinflationary process has started. We can really see that, and we see it really on goods prices so far.
While that was music to the bullish crowd, Powell gave no real hint of a pause in hikes, maintaining that:
Ongoing increases in the target range will be appropriate to a attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time.
But, he appeared to shrug off the fact that financial conditions have dramatically loosened recently, as ZeroHedge pointed out, a dovish fact that surprised traders and created additional upward momentum off the mid-session bottom supported by another short squeeze.
In the end, the markets expected some hawkish tones during the presser, yet Powell did not bite but maintained a more dovish tone pushing terminal rate expectations to much lower levels. Market participants took that as a Fed in capitulation mode.
This affected bond yields, which retreated sharply, with the 10-year dropping all the way below the 3.4% level, which is its lowest point since last September. As a result, the US Dollar got spanked to its smallest since last April, while Gold shifted into overdrive by adding over 1% for the day to close at $1,967.
$2,000 gold looks to be on the horizon.Read More