Asian bourses started the trading session slightly lower as Wall Street traded dormant and choppy until the hawkish FOMC decision, which saw the FED’s Dot Plots lean tighter after projecting a 50bps hike for 2023. The hawkish implications of the dot plot saw global equity and debt markets selling off while a USD Index rose to its highest level in over a month. Fed Chair Powell was keen to emphasise that the dot plots did not reflect a consensus committee decision. There was no tapering decision today. Finally, the Fed made a 5bps hike to its Interest Rate on Excess Reserves and Overnight Reverse Repurchase rates to address concerns of short rates breaking under the Fed’s lower bound. The US Short-Term Interest Rates (STIRs) were also pressured as the Fed made upward tweaks to its administered rates.
For the session ahead, price action will most likely be reflected in the context of yesterday’s heavy sell-off, adding to the well-noted short base built in the Treasury market. On the pandemic front, positive news from Japan is set to lift the State of Emergency on June 20th for Tokyo and eight other areas. Commodity traders will be paying closer attention to the price levels of spot and futures markets as China National Reserve Administration stated China will release national reserves of copper, aluminium and zinc in the near-term which will be released to non-ferrous producers through public bidding, while China also ordered state firms to restrict overseas commodities exposure.
