Pullback In Risk Sentiment After Fed Weighs On AUD

The USD slumped on the Fed’s announcement of a further 75bp increase in rates but then bounced on comments from Fed Chairman Powell that indicated the inflation fight was tough and that the December meeting may not see the Fed slow the pace of hikes. AUDUSD bounced to a high of 0.6492 but then slumped to 0.6348 and underperformed many in the G10 as risk sentiment weakened. It is now trading just above the low at around 0.6355.

• Equity markets were lower across the board as risk appetite pulled back. The S&P 500 was down 2.5% and the Eurostoxx -0.8%. VIX fell on the Fed announcement but ended the session up from there but below the open at 25.9%.
• Oil prices rose 1.1% as US EIA data showed tightness in the market with a 3.115mn drawdown in crude stocks and gasoline falling to its lowest level since November 2014. Copper was lower (-1.1%) but other base metals rose on hopes of China reopening. Iron ore is trading around $82-$83.
• Today Australian trade data for September are released and expected to show an increase in the surplus and positive growth in both exports and imports. RBA Kearns participates in a panel on “Wholesale market conditions and resilience” (1600 AEDT). The Bank of England meets later and is expected to hike rates 75bp to 3%.