Investing.com - Here are the top five things you need to know in financial markets on Thursday, December 15:
1. Dollar soars to 14-year highs on Fed rate hike outlook
The dollar surged to 14-year highs against the other major currencies on Thursday after the Federal Reserve hiked interest rates and signaled it expects to raise rates more quickly than previously anticipated in 2017.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.57% at 102.61 by 5:53AM ET (10:53GMT). The index hit highs of 102.67 earlier, the most since January 2003.
Wednesday’s rate was largely priced in by markets, but the dollar surged after the U.S. central bank predicted it would raise interest rates three times in 2017, up from the two hikes predicted in September.
The greenback hit 10-month highs against the yen, with USD/JPY last up 1.15% at 118.37 at 5:57AM ET (10:57GMT).
The euro also came under pressure, breaking below 1.05 against the dollar and hitting lows not seen since March 2015 at 1.0469 overnight. EUR/USD was last down 0.55% at 1.0457 by 5:57AM ET (10:57GMT).
2. Spread between U.S. and German bond yields hits 16-year high
The fact that the Fed forecast three rate hikes to take place in 2017 drove U.S. bond yields higher as investors sold off the sovereign debt in a demand for a higher return on their investment. Yields move inversely to bond prices.
The spread between yields on the U.S. 10-year Treasury and its Germany 10-Year counterpart hit its highest level since the 1990's on Thursday.
The gap on 2-year debt between the two benchmarks widened to 205 basis points, the largest spread in 16 years.
Overnight, the yield on the U.S. 10-year Treasury hit an intraday high at 2.619%, its highest level since September 2014.
3. Data deluge ahead with focus on inflation and jobless claims
In the aftermath of the Fed policy announcement, market participants will have a deluge of incoming data to evaluate throughout Thursday’s session.
The focus will undoubtedly be on inflation data to gauge further implications for future Fed policy moves while jobless claims are expected to continue to show a firming U.S. labor market.
Both headline and core inflation were expected to have inched higher in November.
In addition, manufacturing activity will be center stage with regional reports from both the New York and Philadelphia Fed as well as the preliminary national data produced by Markit.
4. BoE on tap for next rate decision
After the Fed’s hike on Wednesday, the next major central bank to step up to the plate will be the Bank of England (BoE) at 7:00AM (12:00GMT).
The BoE is widely expected to keep rates unchanged, but analysts are looking to see if it keeps a “neutral” bias (implying that the next change in rates could be either up or down) and whether the vote is unanimous.
Earlier on Thursday, both the Swiss and Norwegian central banks left rates unchanged at 0.75% and 0.50%, respectively.
Switzerland’s SNB warned that the global economy was still subject to considerable risks and that structural problems in a number of advanced economies could negatively affect the outlook.
“Added to this are a multitude of political uncertainties which are particularly associated with the future course of economic policy in the U.S., upcoming elections in several countries in the euro area as well as the complex and arduous exit negotiations between the U.K. and the EU,” the SNB warned.
5. Yahoo slumps 2% on security breach affecting 1 billion users
Yahoo disclosed after Wednesday’s market close that it had suffered another massive cyber attack in August 2013.
The tech firm announced that the security issue affected 1 billion user accounts making it the largest breach in history.
A Yahoo spokesperson said that the firm had been in contact with Verizon and was confident that the breach would not affect its pending acquisition.
Shares of Yahoo (NASDAQ:YHOO) were down more than 2% in pre-market trade.