- The Federal Reserve raised its benchmark rate by 25 basis points, and the U.S. Dollar Index advanced 0.67% to 100.21, its highest level since July 31.
- Market participants had priced a 93% chance of a Fed hike, with the 10-year Treasury yield breaking 5% for the first time since October, reinforcing the dollar's yield advantage.
- Middle East conflict and higher energy prices added safe-haven support for the dollar, while the euro and sterling weakened.
- The ECB hiked 25 basis points last week, but the euro failed to extend gains; UK wage growth held at 3.5% and vacancies fell to 702,000, keeping the Bank of England patient.
Quotes
“The U.S. Dollar Index (DXY) advanced sharply on Wednesday afternoon after the Federal Reserve delivered a 25-basis-point increase in its benchmark interest rate.”
“Market participants have a higher perception of the likelihood that the Fed hikes interest rates tomorrow at 93%.”
“Fundamental bias: DXY bullish, EUR neutral-to-bearish, GBP neutral-to-bearish, Wednesday's Fed guidance and Thursday's BoE decision will be the main catalysts.”