Global stocks decline after Fed rate hike

Global stocks declined today after the Federal Reserve raised interest rates by 25 basis points yesterday. This was a continuation of the declines in Wall Street after the rate decision. In the monetary statement, the Fed lowered its projected number of rate hikes for the coming year to two. Previously, the bank had guided that it will do three more hikes. It also lowered the neutral rate to 2.75% from the previous 3.0%. The Fed was facing increased pressure from the US president against further hikes.

The New Zealand dollar declined sharply after data from the statistics office showed that the economy softened in the third quarter. In the quarter, the economy expanded by an annual rate of 2.6%, which was lower than the consensus estimates of 2.8%. On a QoQ basis, the economy expanded by 0.5%. Meanwhile, in Australia, the country reported better than expected jobs numbers with the employment change gaining by more than 37K people and the participation rate gaining by 65.7%. As a result, the AUD gained by almost a percentage point against the kiwi.

The JPY strengthened against the USD after the Bank of Japan left interest rates unchanged. In the accompanying statement, the bank said that it will continue with the expansionary policies including the QE. The reason is that while the country’s economy is expanding and the jobless rate remains low, inflation has remained significantly lower. Another reason why the yen gained was because of its role as a safe haven when risks are rising and investors are worring about the state of interest rates and trade.

The sterling rose slightly against the USD after the Bank of England (BOE) left rates unchanged in the final meeting of the year. All members of the monetary policy committee voted to leave rates unchanged. In a warning to policymakers, the bank said that the risks of Brexit had intensified considerably in the past month. The bank also added that the falling oil prices were likely to drag inflation further. Before the rate decision, the country released better-than-expected retail sales data. In November, the retail sales gained by a MoM rate of 1.4%, which was better than the expected 0.3%. On a YoY basis, the sales rose by 3.6%. The core retail sales rose by 3.8%.

AUD/NZD

The AUD/NZD pair rose to a high of 1.0553 after GDP numbers from New Zealand disappointed. The pair then eased slightly possibly because of profit taking. On the hourly chart below, the pair’s price was slightly above the 50-day and 25-day EMA while the RSI has moved from being overbought to the current 54. In the short term, the pair could continue moving lower. If this happens, a reversal could happen once the RSI reaches the oversold level of 30.

GBP/USD

The GBP/USD pair moved slightly higher after the BOE final rates decision. The pair reached an intraday high of 1.2707, which was higher than the important resistance level shown below. The RSI continued to move up and is currently closer to the 60 level while the price is above the shorter-term EMAs. The pair could resume the downward trend as risks of Brexit cloud hopes of a rate hike in the first quarter of 2019.

EUR/USD

The EUR/USD pair rose sharply today, paring the losses made yesterday after the interest rates decision. This week, the pair has gained by almost two percent. Today’s high took it to an intraday high of 1.1485 before moving slightly lower. On the hourly chart, the pair is above the short-term EMAs of 25 and 50 days. The RSI has also fallen from 77 to the current 63. Today, the pair could see some short-term declines before continuing the upward trend.