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The Federal Reserve’s latest monetary policy statement was the market mover of the week, resulting in a very positive run for the U.S. dollar and shifting global risk sentiment towards negative.

Notable News & Economic Updates:

Rate Hikes Coming Sooner?

Dollar, Gold, S&P 500, 10-yr Treasury Yield, Bitcoin, Oil
Dollar, Gold, S&P 500, 10-yr Treasury Yield, Bitcoin, Oil

Price action at the beginning of the week was relatively calm, with exception to the crypto markets, once again reacting to Elon Musk’s weekend tweets.  As for the rest of the markets, it’s likely on traders sitting on the sidelines as they awaited the potential fireworks from the Federal Reserve monetary policy statement on Wednesday. And boy were traders not disappointed as the Fed surprised market players with a stronger-than-expected inflation outlook, and hints that interest rate hikes may happen sooner than expected (now possibly two hikes in 2023).

This lit the fire under the U.S. dollar, which seems to have taken down gold, oil and crypto at the same time. And it looks like prospects of higher interest rates have drawn in risk-off behavior as global equities fall and longer-term bonds caught a bid.  This is also likely why we saw a strong move higher in the Japanese yen, possibly catching a “safe haven” bid as Asian equities moved broadly lower into Friday.

In the FX market, all of the majors were down against the Greenback, and as mentioned above, the Japanese yen had a really strong run higher to end the week at second place.  That performance was likely with the help of net positive economic updates from Japan and the near certainty that the Olympic games will be held this Summer.

The Aussie and Kiwi both saw a bounce on Thursday after positive Aussie jobs data and New Zealand GDP data, raising speculation that we may see rate hikes from the RBA and RBNZ sooner than expected. But that was a short-lived move as both negative risk sentiment and a strong U.S. dollar push both currencies to their closing week status as the biggest losers.

USD Pairs

Overlay of USD Pairs: 1-Hour Forex Chart
Overlay of USD Pairs: 1-Hour Forex Chart

GBP Pairs

Overlay of GBP Pairs: 1-Hour Forex Chart
Overlay of GBP Pairs: 1-Hour Forex Chart

EUR Pairs

Overlay of EUR Pairs: 1-Hour Forex Chart
Overlay of EUR Pairs: 1-Hour Forex Chart

CHF Pairs

Overlay of CHF Pairs: 1-Hour Forex Chart
Overlay of CHF Pairs: 1-Hour Forex Chart

CAD Pairs

Overlay of CAD Pairs: 1-Hour Forex Chart
Overlay of CAD Pairs: 1-Hour Forex Chart

NZD Pairs

Overlay of NZD Pairs: 1-Hour Forex Chart
Overlay of NZD Pairs: 1-Hour Forex Chart

AUD Pairs

Overlay of AUD Pairs: 1-Hour Forex Chart
Overlay of AUD Pairs: 1-Hour Forex Chart

JPY Pairs

Overlay of Inverted JPY Pairs: 1-Hour Forex Chart
Overlay of Inverted JPY Pairs: 1-Hour Forex Chart