From Marc Chandler at Bannockburn Global Forex:
Overview: The Federal Reserve delivered its second consecutive 75 bp rate hike, and Chair Powell left the door open for another large hike at the next meeting in September. Yet, the market took away a dovish message and the dollar suffered, rates slipped, and equities rallied. Central banks with currencies pegged to the dollar had to hike too. This includes Hong Kong, Saudi Arabia, Bahrain, and UAE, which matched the move in full. Kuwait and Qatar hiked by 25 bp and 50 bp, respectively. With the exception of Taiwan and Hong Kong, equities in the Asia Pacific region rallied. Europe’s Stoxx 600 edged higher and saw its best level since June 10 today but has lost momentum as the session progressed. US futures are modestly lower after the strong gains yesterday and a rash of earnings today (Amazon, Apple, and Intel are among the highlights after the close today). Benchmark 10-year yields are quiet today. The US 10-year is around 2.77%, while European yields are little change and peripheral spreads are flat to slightly narrower. The dollar is mixed. Of note, the yen is the strongest of the majors, testing its best level in around three weeks. Emerging market currencies are mixed and central European currencies, led by the Hungarian forint, are underperforming.
Gold traders like what they heard from the Fed and after falling to $1680 last week approached $1750 today, moving above its 20-day moving average for the first time this month. September WTU is up 1.8% after yesterday’s nearly 2.5% gain. It is a little above $95. US natgas is 1.45% lower today after falling 3.4% yesterday amid signs that the heatwave may be breaking. After rising for the past six sessions, Europe’s natgas benchmark is broadly flat today. Iron ore continues its recovery, gaining for the fifth consecutive session and at new highs for the month. September copper has also firmed and has risen for the past four sessions. September wheat has recouped yesterday’s roughly 1.7% loss and is up around 2.25% today.
Asia Pacific
The Biden-Xi call today, the second of the year, is the tip of the proverbial iceberg. It does not appear to be much of a market factor. It is arguably being overshadowed by two other reports. The first suggests that the US military is making contingency plans for the Speaker of the House Pelosi to visit Taiwan. Once she signaled her intentions, and China objected, it is difficult for American politicians to back down without looking weak or what would be characterized as kowtowing. The second report says that the US Ronald Reagan aircraft carrier group left Singapore on Monday and headed toward the South China Sea after Beijing warned of retaliation for Pelosi's visit.Separately, Beijing appears to be stepping up efforts to support the property sector.....
....MUCH MORE
That snip "Gold traders like what they heard from the Fed..." is very, very telling on what yesterday's theater actually meant.
