The dollar headed for its strongest rise in 15 months on Thursday, while world equities plummeted in one of the most significant declines in weeks. Such dramatic movements come as a result of the U.S. Federal Reserve’s statement on Wednesday, in which it suggested that interest rates may be raised at a faster pace than was initially expected. Investors were left startled as a consequence.
With 10-year U.S. Treasury yields rising by the most since March, Europe’s government borrowing costs also experienced an upward surge. The European STOXX 600 index’s nine-day winning streak—the longest since 2017—came to a grinding halt.
“The most hawkish development was the dot plot now showing the 2023 median dot pricing in 2 rate hikes (25bps), compared to 0 hikes last meeting,” remarked Deutsche Bank macro strategist Jim Reid.
Following the recent U.S. Federal Reserve revelation, the Euro began its descent to $1.1930 after starting the session at a little over $1.20. The dollar, in turn, fell just short of its 2021 high against the yen, settling at 110.72 yen.
Due to the rise in bond yields and the dollar, non-yielding gold plummeted to $1,810 an ounce. Oil managed to absorb much of its potential damage due to the strengthening world demand and continued tight supply.
