Compass Global Markets' Blog

Market Update - 20th December 2018 - AUD & Equities Slammed As Fed Hike Again With Target Of 3%

Posted by Patrick Downes on December 20, 2018 at 8:11 AM

Please note that the commentary below is factual information provided to a group of readers as a web blog, and where an opinion is expressed by the author, it is GENERAL ADVICE only.

The AUD has been slammed in the early hours of this morning as U.S Fed Chair Powell raised U.S interest rates by 25 basis points to 2.5%, while signalling two further rate hikes forecast for 2019 which will take U.S interest rates back to 3.00%. The market clearly wasn't expecting a reiteration of further rate hikes and this morning we have seen a substantial and sudden sell off in both U.S equities and the AUD, surprisingly though commodity prices have escaped the carnage unscathed. U.S equities which were in the green before the Fed meeting at 6.00am turned negative almost immediately and finished the U.S session down between 1.5 and 2.1 percent, while AUD/USD lost 70 points or 1% in a matter of minutes. AUD/EUR, AUD/GBP and AUD/JPY are lower by similar amounts.

Listening to the Fed Chair Powell earlier this morning and you get the feeling that while the market thinks the end is nigh, he actually appears quite calm and perhaps even a little bullish on global growth and inflation. Powell noted that while inflation remains just below their target of 2.00% he thinks they are close enough to it to continue normalising interest rates. Additionally he commented that Politics (namely Donald Trump) has no influence over the independence of the Fed or their decision making process - 'its all about the numbers and the data' as he reiterated a number of times in his speech.

Aussie equities futures are suggesting a negative start, but markets remain exceptionally choppy as I write and this may well change. It will be very interesting to see if this last Fed meeting of the year remains a sell the news event or turns out to be an opportunity to buy the dip, i.e. stocks, commodities and the AUD at or near the bottom.

AUD EXCHANGE RATES:

AUD/USD – 0.7076

AUD/GBP – 0.5598

AUD/EUR – 0.6214

AUD/NZD – 1.0421

AUD/JPY – 79.660

USD/BTC – $3,713

OTHER MARKETS:

All Ords (XAO) – 5,650

Gold – A$1,750/oz

Silver –  A$20.54/oz

WTI – US$47.44/barrel

DATA RELEASES TODAY:

AUD - Employment Change and Unemployment Rate at 11.30am

GBP - Retail Sales at 8.30pm

GBP - Official Bank Rate & Monetary Policy Statement at 11.00pm


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Patrick Downes

Senior Corporate FX Dealer

Phone Patrick - 0431 278 632 

  Email Patrick: patrick@compassmarkets.com

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 DISCLOSURE AND DISCLAIMER - GENERAL ADVICE WARNING
The information provided in this report has been prepared without taking into account your particular objectives, financial situation or needs. You should consider whether our products are appropriate for you and read the FSG and PDS which are available on this website.
This report and must not be copied, either in whole or in part, or distributed to any other person.
All references to prices, amounts and currency are in Australian dollars unless otherwise noted.
This report is provided for Australian residents only and is not intended for use by residents of any other country.

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