What you need to take care of on Thursday, May 5:
The American dollar plunged after the US Federal Reserve monetary policy decision. The central bank delivered as expected, as the central bank raised rates by 50 bps to a range of 0.75% to 1% while announcing they would begin trimming the balance sheet on June 1. They would start with a $47.5 billion cap on monthly runoff and rise to $95 billion monthly after three months.
The market did not react to the announcement but later to chief Powell’s words. Among other things, Powell noted that the Russian invasion of Ukraine adds to already overheated inflation, remarking that the central bank is highly committed to taming it. He then dismissed the chance of a 75 bps while adding that core inflation is nearing a peak, although more evidence is needed. The greenback plummeted as stocks rallied on relief.
Asian and European indexes closed in the red, but Wall Street soared. The Dow Jones Industrial Average added 932 points, while the Nasdaq Composite gained 401 points. The S&P closed the day 2.99% higher.
US government bond yields, on the other hand, eased, with the one on the 10-year note settling at 2.93% after peaking at 3.01%.
Meanwhile, European Commission President Ursula von der Leyen presented the sixth pack of Russian sanctions. She said the region would phase out the Russian supply of crude oil and refined products by the end of the year. The news weighed on high-yielding assets, keeping European indexes trading in the red amid the potential effects on economic growth. US Treasury Secretary Janet Yellen later noted that such a move could drive oil prices higher and that she needs to see the conditions of how this will be accomplished.
Commodity-linked currencies benefited the most from the broad dollar’s weakness combined with soaring equities. AUD/USD trades around 0.7260, while USD/CAD is down to 1.2730.
The EUR/USD pair trades at 1.0624, while GBP/USD advanced beyond the 1.2600 figure. Even safe-haven CHF and JPY posted gains against the greenback.
Gold currently trades at $1,883 a troy ounce while crude oil price resumed their advances, with WTI now at around $107.60 a barrel.
The Bank of England will announce its monetary policy decision on Thursday.
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