USD/JPY drops on the dovish Fed 25 bp rate hike
|- USD/JPY is dropping like a stone on a dovish Fed rate hike.
- Bears are in the market as the US yields US Dollar sinks during Fed Powell´s presser.
USD/JPY is under pressure as the Federal Reserve drives markets to reprice interest rate expectations due to a dovish rate hike of just 25 basis points and tweaks to the Federal Open Market committee´s statement and forward guidance.
Ahead of the decision, the money markets were pricing in a year-end target rate of 4.36%. This has dropped in volatile reactions to the statement to 4.26%. At the time of writing, US 2-year Treasury yields are down to 4.77%, dropping from 4.259% on the day to print a low of 3.958%. USD/JPY is plummeting as a result to test the 131.20s and it has fallen from a high of 133.00.
Fed event key notes, so far
- The median forecast shows rates at 5.1% end-2023, 4.3% end-2024.
- 'Some additional policy firming may be appropriate.'
- FOMC deletes reference to ongoing increases.
- US banks are sound, resilient but events to weigh on growth.
- Likely to see tighter credit conditions that weigh on economic activity, hiring and inflation.
Meanwhile, Federal Reserve chairman Jerome Powell is speaking to the press in an event that started at 18.30GMT.
Fed hikes policy rate by 25 bps as expected, focus shifts to Powell – LIVE
Powell speech: Isolated banking problems can threaten banking system if left unaddressed
Powell speech: Recent banking events will result in tighter credit conditions
Powell speech: Before banking stress, thought we would have to raise terminal rate
Powell speech: Tightening in credit conditions may mean monetary tightening has less work to do
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.