Investors’ mood shifted sour as the time closed to read the Federal Reserve’s monetary policy statement and hear its Chairman Jerome Powell at the stand. Money market futures foresee a 25 bps rate hike, with odds at an 86.4% chance.
Three weeks ago, Jerome Powell opened the door for faster rate hikes before a banking crisis hit the US and abroad. Two lenders in the United States (US) collapsed, while First Republic Bank got aided by 11 banks pledging $30 billion. Late Tuesday, the US Secretary of Treasury Janet L. Yellen calmed the financial markets after stating that the government would intervene to protect depositors of small banks.
That was a green light for traders hungry for risk ahead of the Fed’s decision. Nevertheless, the three major US equity indices are trading below Tuesday’s close by a minimum percentage.
US Treasury bond yields had recovered some ground in the fixed income space, with 2s and 10s almost unchanged at 4.197% and 3.583%, respectively. The greenback is on the defensive, as shown by the US Dollar Index (DXY), down 0.07%, at 103.144.
On the Australian front, the minutes of the last meeting of the Reserve Bank of Australia (RBA) forgot to mention discussions for a higher rate hike, with board members considering only 25 bps. Regarding the strength of the banking system, the RBA’s Governor Kent states that banks are “unquestionably strong.”
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