Markets React to Fed Rate Hike and Yellen's Testimony

This week, the Federal Reserve increased interest rates as expected (25 bp) and indicated its intention to act against high inflation. However, mixed signals were understood from the press conference following the hiking decision, implying the possibility of a pause in interest rate hikes due to pressure on the banking sector.

US Treasury Secretary, Janet Yellen, has vowed to protect deposits amidst concerns about the stability of the banking system. Meanwhile, governments around the world are making efforts to reassure the public that financial stability remains intact.

European Markets

In February, UK retail sales unexpectedly rebounded by 1.2% from the previous month (0.9%) which brought sales volumes back to their pre-pandemic level. Despite the good reading the FTSE was unable to snap back in the red near $7,357.

Commodities

This Friday, gold prices remained close to key levels, continuing to outperform the dollar for the 3rd consecutive week.

This is due to traders seeking the yellow metal as a preferred safe haven amidst signs of a less hawkish Federal Reserve and banking sector turbulence. If current levels hold, bullion prices are also on track for a fourth consecutive week of gains, as the US dollar declined to a seven-week low against a basket of currencies.

Oil prices

WTI sharply dropped today to go below the $70 mark and trade near $67. Brent crude was trading near $73.

US Futures

US futures turned red despite a soft close in the green territory overnight after Yellen’s reassuring speech.

The decline in treasury yields helped the technology sector slightly overnight, Meanwhile First Republic bank dropped 6% amidst on-going volatility in the banking sector.