Daily summary: Stocks fall, yields rise as Fed sees hikes as soon as 2023

• Dollar hits six-week high
• US stocks fell after FOMC decision
• Gold fell to 1-month low

Today's session in Europe was quite muted as investors were restrained from taking transactions ahead of the FED meeting. Some indices managed to move slightly higher and reach new all-time highs. Travel and leisure, utilities and chemical stocks were the best performers, as investors bet on a jump in consumer demand and industrial production while banking stocks lag the most. On the economic data front, British inflation unexpectedly jumped above the BOE 2.0% target last month and this trend may continue as the country re-opens its economy from lockdowns.

US indices fell sharply after the FED decision but managed to recover some ground during Powell’s press conference. The Federal Reserve kept the fed funds rate at 0-0.25% and bond-buying at a $120 billion monthly pace during the June 2021 meeting as widely expected, but policymakers signaled they expect two increases by the end of 2023. Fed lifted interest rate on excess reserves (IOER), from 0.10% to 0.15%, due to rising pressures in the short-term lending market. Meanwhile, new economic forecasts showed the GDP is expected to reach 7% in 2021, compared to 6.5% from the March projection. The expectations regarding 2022 growth remain unchanged at 3.3%. Unemployment is seen at 4.5% this year, unchanged from the March projection but inflation is seen much higher at 3.4% in 2021 (2.4% in March) but is expected to slow to 2.1% in 2022 (vs 2% in March). On the geopolitical front, Russian President Vladimir Putin said he and President Joe Biden agreed Wednesday that their respective ambassadors will return to their foreign posts, marking a resumption of diplomatic operations between the two adversaries that had been suspended since April. However Russia still blames the US for all of the worsening of relations. On the data front, the housing market in the US again showed signs of weakness amid increasing costs and shortages of other building materials. 

Oil prices increased on Wednesday, after the EIA showed that US crude oil stocks fell by 7.355 million barrels, a fourth consecutive period of decline and the largest since the last week of April. WTI crude price rose to $ 72.3, near its highest level since October 2018. Brent jumped above $74.80. However commodities prices erased early gains after the FED decision. Gold fell 1.5% to 1 month low at $1840/oz while silver dropped 1.0% below $27.50 /oz. The dollar appreciated to as high as 91.10 against a basket of currencies on Wednesday, a level not seen since May 5th. The yield on the benchmark 10-year Treasury note jumped by around 5bps to an over one-week high of 1.56%.

US30 broke below the lower limit of the descending channel and major support at 34181 pts after the FOMC decision. Should current sentiment prevail, downward move may be extended to the 33728 level. On the other hand, one can see that buyers are trying to regain control. If they succeed then another upward impulse towards all-time high at 35019 pts may be launched. Source: xStation5