Following the historic Fed rate hike, stocks launched higher with the S&P 500 putting in its strongest rally in two years on the back of the move. The US Dollar dropped down for a test at a fresh swing-low.
The reason for the move is related to the building expectations for a 75 basis point hike in June that markets had been building in. So, this comes down to a question of just how aggressive the Fed wants to be in addressing inflation. If going by verbiage from various Fed members in the lead-up to yesterday’s hike, it really seemed as though most members of the bank were moving closer to desperation in looking to temper inflation.
But – given the persistence of inflation, the door was opening to some type of communication from Chair Powell that such a move might be on the table for next month. It was when he ruled this out in the presser that markets really began to fly, with the S&P 500 jumping up to fresh highs as the US Dollar backed down.: ‘Given how strongly bid the USD was ahead of today’s event, the big question remains for how much longer this might fall.