Markets are digesting the Federal Reserve’s hawkish announcements
US stock markets reversed earlier losses and finished higher overnight after the Federal Reserve confirmed it will accelerate the pace of tapering, starting in January 2022. The Fed will double the pace of its asset tapering program to $30 billion a month. The decision was hawkish but came in line with expectations, pushing stocks higher nearly across the board. The sentiment was also buoyed by the news conference where Jerome Powell struck an upbeat tone about the US economic recovery. as such, the S&P 500 gained 1.63%, the Dow Jones gained 1.08%, and the Nasdaq rallied 2.15%.
Asian equities were mixed on Thursday, digesting the Federal Reserve’s hawkish announcements. Investor sentiment looked cautious ahead of the ECB meeting and also amid the ongoing spread in Omicron. Japan’s Nikkei 225 rose 2.13%. New Zealand’s NZX 50 dropped 0.70% as New Zealand reported the first Omicron case. On the data front, NZ Q3 GDP eased below -4.5% expectations to -3.7% while the yearly growth figures came in -0.3% versus -1.6% forecast.
In currencies, the greenback rallied in a knee-jerk reaction to the Fed decision. However, the US currency reversed south then and finished the day lower versus most of its counterparts as Powell have cooled down speculative expectations by saying that the central bank would not hike rates before an end to the tapering
The USD remains on the defensive on Thursday as trades shift focus from the Fed to the ECB. The European central bank is widely expected to leave interest rates unchanged. The bank may also unveil a plan to retire the PEPP. Updated macro projections will be in focus as well. Should the ECB deliver a dovish and cautious decision, the euro would fall back to the 1.1200 region.