Interest Rate Announcement Spooks Markets: Stocks Swing, Dollar Rises, and Gold Weakened – What’s Next?

TOKYO, Japan – Following Federal Reserve Chair Jerome Powell’s announcement that interest rates are unlikely to be cut before March, treasuries experienced a decline in Asia. The dollar also strengthened against most major peers. This statement led to a change in investor predictions for a rate cut in March by the Fed, dropping to around 20% from almost 40% on Thursday. This is due to economic resilience which reduces the likelihood of imminent policy easing.

Powell’s hawkish comments have also led the market to expect five rate cuts this year. This is a much higher expectation compared to the Fed officials’ willingness to cut interest rates. In the wake of the US’s vow for more strikes against Iran’s forces and proxies, oil prices have edged higher. Meanwhile, former US President Donald Trump may impose a tariff on Chinese goods of more than 60% if elected.

In terms of key events this week, there is a range of economic data scheduled to be released, including Eurozone S&P Global Services PMI, Australia’s rate decision, Germany factory orders, China PPI/CPI, and various speeches from central bank officials.

These announcements have had an impact on the stock market, with S&P 500 futures falling 0.2% as of 2:32 p.m. Tokyo time and the S&P 500 rising 1.1% on Friday. Major currencies, including the euro, Japanese yen, offshore yuan, and Australian dollar, have all seen little change in their respective values. Bitcoin and Ether have also fluctuated slightly in the cryptocurrency market.

The yield on 10-year Treasuries in the US, as well as Japan and Australia, has advanced, while oil and gold prices have also demonstrated changes. The impacts of these shifts in the global market are significant and indicative of the international economic climate.