Last week has finally come the most anticipated time of the year by all traders, investors and market operators: the rise in the Federal Reserve interest rates for the second time in the last 10 years. This time the market was right.
The members of the Federal Reserve has announced the first rise in interest rates in a year at the meeting of Wednesday, December 14 and predicted three more increases in 2017. The market was waiting for a long time this decision since there were a lot of signals that US economy can finally say goodbye to its long period of stagnation.
The Fed has raised the target range on interest rates from 0,25-0,50% to 0,5-0,75%. The rate on overnight funds is currently 0,41% and the discount rate was increased from 1% to 1,25%.
The US Central Bank also said to expect three rate hikes in 2017, two or three in 2018 and three in 2019. After that Janet Yellen has pointed out that the rise will be ‘gradual’.
The stock market reacted calmly, while bond yields and the dollar rose. The yield on 2 years Treasury has scored the maximum level since August 2009.
The euro-dollar exchange rate has been catapulted to new yearly lows; all safe havens prices plummeted, starting from gold. The yen has benefited from the new developments brought by the Federal Reserve reducing its value and improving the upgrade of USD / YEN exchange towards 118, the most significant level of 2016.
As for EUR / USD, after a day of stability above 1,060, the exchange rate is back to travel on 1,05 area after the increase of US interest rates given a strong boost to the US dollar.
The comments of Janet Yellen during the press conference brought EUR / USD exchange rate to the minimum area below which the cross has only one reference price: 1,046. It was in this area that EUR / USD has stationed in the following days of the week.
EUR / GBP was rather harmless to both Fed meeting and inefficient BoE meeting which decided to keep interest rates and Quantitative Easing program unchanged.
EUR / GBP has therefore maintained the downward pursued for October and the target audience to watch from now on is at 0,830 that was already a support ten days ago.
The pound has remained strong in the major changes that involve him but the strength of the US dollar pushed the GBP / USD from 1,27 to 1,25.
Gold was pushed to the minimum of 10 months ($ 1134,71) with a daily downward at $ 1,140 per ounce. Before falling by more than one percentage point, the price of the precious metal was stable over $ 1,160 per ounce. Even the price of silver has marked a daily decline of 7,30% to $ 15,8 on Wednesday.
Putting aside the Federal Reserve, this week have been published the inflation figures of New and Old Continent. In both cases they were in line with market expectations.
The Euro zone inflation on annual basis amounted to 0,6%, while on a monthly basis the consumer price index was -0,1%.
The US inflation on an annual basis, however, was 1,7%. The core consumer price index on a monthly basis was 0,2%, while on an annual basis was 2,1%.