Fed Keeps Rates Unchanged, Dollar Slips, Gold Soar

The Fed keeps rates unchanged, the dollar weakens, and gold surges. Asian markets react. The outlook for key currencies and oil is also positive.

In its latest decision, the Federal Reserve opted to maintain the Federal Funds rate at 5.25% to 5.50%, marking the fifth consecutive meeting without any changes. This decision was widely anticipated and follows a similar pattern to previous meetings. However, The latest FOMC statement made notable adjustments, particularly regarding job gains, which remained strong despite earlier moderation.

At a press conference following the decision, Chairman Jerome Powell appeared unperturbed by recent inflationary trends, reiterating the Fed’s forecast of three 25-basis-point rate cuts in 2024.

Market reactions were swift. The dollar index (DXY) experienced a notable decline, dropping from 103.90 to 103.38 by the end of Powell’s conference. Conversely, gold prices surged, surpassing $2,200/oz to reach an overnight high of $2,222.87/oz, fueled by perceived dovish sentiments.

Fed Keeps Rates Unchanged, Dollar Slips, Gold Soar

Asian Markets React

As Asian markets responded to the Fed’s decision, the dollar stabilized around 103.25, showing signs of recovery. Meanwhile, gold prices retreated from their overnight highs, dipping below the $2,200/oz threshold. However, market dynamics remain uncertain, and shifts in sentiment could lead to reversals as the day progresses.

Market Outlook for Key Currencies

• Australian Dollar (AUD): Positive employment figures will bolster the Aussie following the dovish Fed outcome.
• New Zealand Dollar (NZD): Despite economic struggles, the Kiwi remains buoyed by dovish Fed rhetoric.
• Japanese Yen (JPY): Core inflation acceleration could strengthen the yen against the dollar.
• Euro (EUR): Eurozone contraction may limit gains despite positive momentum.
• Swiss Franc (CHF): SNB expected to maintain the policy, with any dovish hints likely to boost the franc.
• British Pound (GBP): Strong PMI data may further support the Pound.
• Canadian Dollar (CAD): Continued weakness in USD/CAD anticipated following dovish Fed comments.

Oil Market

Drawdowns in inventories will support relatively stable oil prices despite recent fluctuations.

The Fed’s decision to maintain rates has triggered significant market movements, with currencies and commodities reacting accordingly. However, ongoing uncertainties suggest that volatility may persist throughout the day.

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