Fed signals prolonged high rates; USD jumps on hawkish stance
No surprise in the US on Wednesday evening, the Federal Reserve kept its interest rates in the current 5.25%–5.50% range. However, the US dollar rose when Jerome Powell took a firm, hawkish stance.
The Federal Reserve
No surprise in the US on Wednesday evening, the Federal Reserve kept its interest rates in the current 5.25%–5.50% range. However, the US dollar rose when Jerome Powell took a firm, hawkish stance. Updated quarterly projections show the central bank may still lift rates one more time this year to a peak 5.50%–5.75% range.
The Federal Reserve (Fed) foresees half a percentage cut in 2024. As of June, Fed officials had expected to cut rates by a full percentage point next year. Policymakers now see the fight against inflation lasting into 2026 and believe they can succeed without damaging the economy.
USD/JPY
The USD jumped to set a fresh six-month high on the news. USD/JPY set a new 2023 high, taking it above the ¥148 level. Cable also broke the May 25 support to set a five-month low and remains under selling pressure this Thursday.
The Bank of England
At lunchtime, the Bank of England will decide on its rates. Before Wednesday's inflation data, all but one of 65 economists polled by Reuters predicted Andrew Bailey would raise rates by 25 basis points to 5.5%. A hike is still on the cards this morning, but as soon as CPI data was out on Wednesday, investors piled into bets on the Bank of England (BOE) keeping rates steady.
Consumer price inflation in Britain fell unexpectedly to 6.7% in August, and core inflation also decreased to 6.2% after staying unchanged at 6.9% in July.
JD Sports Fashion
Elsewhere on the equity market, Next raised its full-year profit forecast again after reporting a 4.8% rise in pretax profit. JD Sports Fashion increased its interim dividend back to pre-pandemic levels.
FedEx
Over in the US, FedEx surprised investors with a huge profit beat. Earnings came in at $4.55 per share, a jump of 32% year-over-year (YoY), smashing the $3.70 the Street expected as the result of its cost-cutting programme. It also poached customers from rivals UPS and Yellow. Revenue came in broadly in line at $21.70 billion.
FedEx is not an all-session stock on the IG platform. The stock is expected to jump at the open on Thursday afternoon. In extended trading on Wednesday, FedEx shares rose as much as 5.7%.
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