June 15, 2023: Fed Confirms Battle with Inflation is not Over


Fed hints about further interest rate hikes supported the dollar’s strength.

The dollar rose in Asian trading on Thursday, following hints from the Federal Reserve about further interest rate hikes. Meanwhile, the currencies of China and New Zealand declined amidst indications of economic contraction in both countries.

Market attention is now shifting to the decisions of other central banks at the end of this week.

DXY: The dollar index rose by 0.28% to 103.21, recovering from a four-week low of 102.66 reached on Wednesday after the Federal Reserve kept interest rates unchanged but signaled that borrowing costs would increase by another 50 basis points by the end of December.

EUR/USD: The euro dropped by 0.12% to $1.0818 but rose against the Japanese yen by 0.35% to 152.26.

USD/JPY: The yen weakened against the dollar, declining by 0.46% to 140.735.

NZD/USD: The New Zealand dollar also fell by 0.68% to $0.6170 after data showed that the New Zealand economy slipped into a recession in the first quarter.

USD/CNY: The Chinese yuan decreased by 0.1% and touched 7.1872 against the dollar, its weakest level since November, after the People’s Bank of China reduced the borrowing cost for its medium-term loans for the first time in ten months.

Gold prices retreat as Fed maintains neutral stance on interest rates.

The price of gold (XAU/USD) has experienced selling pressure following a relatively uncertain recovery, reaching near $1,932.42 at the time of writing. The retreat of this precious metal is attributed to the Federal Reserve’s (Fed) decision to maintain a neutral stance on interest rates, considering it a mere pause. Fed Chair Jerome Powell has affirmed that further interest rate hikes will be implemented as a means to combat stubborn inflation, which remains a significant challenge.

Market sentiment remains cautious as the Fed emphasizes the persistence of core inflation and extremely tight labor market conditions. Furthermore, Powell confirmed that there are no plans for interest rate cuts before the end of the year.

Oil slightly rises after interest rate decision, recouping some losses.

Oil prices rose on Thursday, June 15, recovering some of the losses incurred the previous day on concerns over future US interest rate hikes. The markets now turn their attention to important Chinese economic data for demand indicators.

Brent crude futures rose by 19 cents, or 0.26%, to $73.39 per barrel.

US crude reached $68.45 per barrel, up by 18 cents or 0.26%.

Benchmark crude dropped by 1.5% on Wednesday after expectations of further interest rate increases by the US Federal Reserve raised concerns about potential economic slowdown and reduced demand for oil.

Additionally, high-interest rates support the rise of the dollar, making dollar-denominated commodities more expensive for holders of other currencies.

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

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