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FTSE falls on hawkish Fed, USD rallies, crude falls, cryptos steady

EconomyJun 17, 2021 16:35
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Key Points

  • FTSE 100 closing price of 7154.60, -0.42%
  • Airlines take off on holiday hopes
  • USD rallies after Fed decision
  • Commodities weak on strong USD
  • Cryptos steady, Bitcoin below $40K

By Samuel Indyk

Investing.com – The FTSE 100 finished in the red after Wednesday’s Federal Reserve meeting where the central bank brought forward their view for the first interest rate hike to 2023. The decision weighed on riskier assets amid fears that the Fed will begin turning off the taps and begin to slowly taper asset purchases sooner rather than later.

Airlines bucked the trend, rallying on reports that the UK government is considering allowing fully vaccinated travellers to avoid having to quarantine on their return from ‘amber’ list countries. Countries currently on the ‘amber’ list include the most popular tourist hotspots, such as Spain, France, Italy, and Greece.

Ryanair (LON:RYA), EasyJet (LON:EZJ), IAG (LON:ICAG) and Wizz Air (LON:WIZZ) all finished the trading day with gains, as did tour operators Tui (LON:TUIT) and Jet2 (LON:JET2) and jet engine manufacturer Rolls Royce (LON:RR).

The US Dollar benefitted from the hawkish Fed projections for interest rates with GBP/USD dropping below 1.4000 and EUR/USD through 1.2000.

“Technically, dollar bulls are now in control of G10 FX,” said Caxton Senior Market Analyst Michael Brown in an emailed note.

In the world of other central banks, the Norges Bank paved the way for an interest rate hike in September, saying the policy rate will most likely be raised at that meeting.

Meanwhile, the Swiss National Bank maintained their view that the CHF remains highly valued and reiterated it will remain ready to intervene to weaken the CHF if necessary.

Commodities were generally soft as the stronger USD weighed on everything from copper to oil and from gold to soybeans.

WTI briefly dropped back below $72 after recently trading at its highest level since October 2018. Similar price action was seen in Brent which briefly traded below $74 after hitting its highest since April 2019 yesterday.

Unsurprisingly, gold was one of the big movers in the world of commodities with the yellow metal dropping over 4% and firmly below $1800/oz. Easy monetary policy has been one of the big drivers behind the resurgence in gold but with the Fed now looking to raise rates and taper asset purchases sooner than the market had expected, the price of gold has fallen.

One market that has been unusually quiet has been cryptocurrencies. Bitcoin trades steady but remains below $40,000 following the Fed rate decision and news that the World Bank had decided not to offer their support to El Salvador in their quest to adopt Bitcoin, citing environmental and transparency concerns.

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FTSE falls on hawkish Fed, USD rallies, crude falls, cryptos steady
 

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