Volatility Plagues Stocks and US Dollar After FOMC Rate Decision
- Federal Reserve left the target Fed Funds rate unchanged
- Exposure management may falsely appear as new trends
- US Dollar and stock prices decline after FOMC decision
Volatility appeared to be the name of the game going into the FOMC rate decision. Technical breaks over the short term may have been disguised as risk-on sentiment by traders managing exposure around the possibility of a rate hike. This means that recently established trends may lack follow through. After a 9-1 vote to keep the Fed Funds rate unchanged, the US Dollar declined as might have been expected. Surprisingly, equities sold off as well, most likely due to the US central bank’s first mention of possible spillover from China. With a vote not to change the base rate in September, markets will be speculating if the first hike will come in October, December or beyond.