[Market Morning] The Fed Announced to Raise Interest Rates by 75 Basis Points, Or Increase Interest Rates by 100-125 Basis Points During the Year
[Market Morning] The Fed Announced to Raise Interest Rates by 75 Basis Points, Or Increase Interest Rates by 100-125 Basis Points During the Year

On Wednesday, spot gold went on a roller coaster ride, first falling below the $1,660 mark and then pumping back about $34 to a maximum of $1,687.98, and finally closed up 0.56% at $1,674.22 per ounce; spot silver failed to challenge the $20 mark. It fell back and finally closed up 1.50% at $19.56 an ounce.
Comment: Gold prices rebounded on Wednesday as Treasury yields retreated after the Fed raised interest rates by 75 basis points as expected. The Fed raised its target rate by three-quarters of a percentage point and signaled further rate hikes.
Suggestion: short spot gold at 1670.88 position; the target point is 1653.49.
The U.S. dollar index rose sharply, reaching a high of 111.66 during the session, and finally closed up 1.05% at 111.35; the yield on the 10-year U.S. Treasury bond also rose sharply, closing at 3.534%. The yield on the 2-year U.S. Treasury bond exceeded 4%, continuing to hit a new high since 2007.
Comment: The dollar surged to a new 20-year high on Wednesday after the Federal Reserve raised interest rates by another 75 basis points and signaled further large-scale interest rate hikes at the next meeting.
Suggestion: short EUR/USD at 0.98390 position, target point at 0.98135.
In terms of crude oil, the two crude oils rose first and then fell. WTI crude oil fell sharply after rising to a high of US$86.64/barrel in European trading and finally closed down 1.47% at US$83.02/barrel; Brent crude oil fell below the US$90 mark, and finally, It closed down 0.94% at $89.98 a barrel.
Comment: Oil prices fell about 1.5% in choppy trading on Wednesday to near two-week lows after the Federal Reserve raised interest rates again sharply in a bid to curb inflation, which could reduce economic activity and oil demand.
Suggestion: short U.S. crude oil at 82.529 position, target point at 80.990.
After the Federal Reserve announced a 75 basis point interest rate hike, U.S. stocks trended repeatedly and fell again in late trading. The Dow closed down 1.7%, the Nasdaq closed down 1.79%, and the S&P 500 closed down 1.71%.
Comment: The major U.S. stock indexes closed lower on Wednesday, showing a tug-of-war in the session, falling sharply in the last 30 minutes, as investors digested the U.S. Federal Reserve’s third super-large interest rate hike and its 2023 plan. Promise to keep raising interest rates to fight inflation.
Suggestion: go short the Nasdaq index at 11549.400 position, target point at 11433.500
Fed hikes rates by 75 basis points
On September 21, local time, in order to further ease inflation, the U.S. Federal Reserve announced to raise the target range of the federal funds rate by 75 basis points to between 3% and 3.25% basis points. The Fed’s rate hike has raised the federal funds rate to its highest level since early 2008. Economists are increasingly concerned that, over time, a sharp Fed rate hike will lead to massive layoffs at U.S. companies, rising unemployment, and a full-blown recession by the end of this year or early next year. The Associated Press also commented in its report that aggressive interest rate hikes had increased the risk of the United States falling into a recession.
Energy prices soar as U.K. caps prices for business users
Inflation has been high in the U.K. recently, and energy prices have soared. The British government announced on the 21st that it would set a price cap on electricity and natural gas used by business users. However, this will significantly increase the financial burden on the government. The program will be implemented from October 1 to March 31 next year, and the beneficiaries will be all non-family users, including businesses, medical units, teaching institutions, and charities. The U.K. government has previously introduced price caps for home users. Under the scheme, the discounted wholesale price for electricity is expected to be £211 per MWh, and the discounted wholesale price for gas is equivalent to £75 per MWh. The final unit price will be determined on the 30th. The market prices for these two sources of energy are expected to be £600 and £180 per MWh, respectively, over the same period. The U.K. government will compensate the supplier for the corresponding price difference. Official figures have not been released, but reports suggest the package could cost the government £42bn.
German government signs deal to nationalize country’s energy giant
The German government and Uniper Energy Group reached an agreement on the 21st local time and will spend huge sums of money to buy and nationalize the group’s shares. The deal also further expands the Uniper rescue package announced by the federal government in July. According to the Federal Ministry of Economic Affairs, the German government will buy 78% of its Uniper shares from Finnish energy group Fortum at a price of 1.70 euros per share, for a total purchase price of 480 million euros. As a result, the federal government will hold a 99% stake in Uniper. In addition, the federal government also plans to increase the capital of Uniper by 8 billion euros, including a shareholder loan of 4 billion euros and a guaranteed line of 4 billion euros.
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