• The Fed delivered a widely expected 25bps rate hike but dropped its reference regarding ‘ongoing’ rate hikes.
• Fed kept its terminal rate view at 5.10%, while the median view for rates in 2024 was raised to 4.3% from 4.1%.
• US Treasury Secretary Yellen told lawmakers that the Treasury is not considering insuring all uninsured bank deposits.
• APAC stocks traded mixed with price action choppy as markets digested the FOMC. US equity futures nursed some of the prior day's losses.
• European equity futures are indicative of a lower open with the Euro Stoxx 50 -0.4% after the cash market closed up 0.3% on Wednesday.
• DXY was pressured and slipped below 103, EUR/USD is on a 1.09 handle, antipodeans outperform.
• Looking ahead, highlights include US IJC & New Home Sales, BoE, SNB, Norges Bank & CBRT Policy Announcements, Speeches from ECB's Lane, Knot & BoE's Mann.

US TRADE

EQUITIES

• US stocks ultimately declined in the aftermath of the FOMC meeting and Powell's press conference in which the Fed delivered a widely expected 25bps rate hike but dropped its reference regarding the view that ‘ongoing’ rate hikes will be appropriate, while the main message was that the situation was uncertain and that the bank stresses were causing a tightening in credit conditions. Furthermore, Powell emphasised that progress on inflation was still required and that the Committee was prepared to do more on rates if needed with rate cuts not in the baseline expectation for this year, while comments from Treasury Secretary Yellen also played a downside role for equities as she testified to lawmakers that the Treasury was not considering insuring all uninsured deposits at banks.
• SPX -1.65% at 3,936, NDX -1.37% at 12,567, DJIA -1.63% at 32,030, RUT -2.83% at 1,727.
• Click here for a detailed summary.

FOMC

• FOMC lifted its Federal Funds Rate target by 25bps to 4.75%-5.00%, as expected, while its updated economic projections left the terminal rate view unchanged at 5.1% and its statement removed the reference to the Committee anticipating that ‘ongoing increases in the target range will be appropriate’ but noted that ‘some additional policy firming may be appropriate’. Fed expressed confidence in the banking system which it described as ‘sound’ and ‘resilient’ although noted that recent developments were likely to result in tighter credit conditions and will weigh on economic activity, hiring and inflation. Furthermore, the Fed said it would continue to reduce Treasury and MBS holdings in line with its previous announcements.
• Fed kept its terminal rate view at 5.10%, while the median view for rates in 2024 was raised to 4.3% from 4.1%. The inflation profile was increased this year but was unchanged for 2024 and 2025, while the core inflation view was slightly nudged up for this year and next.
• Fed Chair Powell said at the post-meeting press conference that isolated banking problems, if left unaddressed, can threaten the banking system which is why the Fed took decisive action but noted that deposit outflows in the banking system have stabilised over the last week. Powell noted the FOMC thought it would have to raise the terminal rate a couple of weeks ago before the banking stresses and at the meeting, he heard a significant number of people were anticipating tightening credit conditions which were included in the forecasts.
• Fed Chair Powell said most of the inter-meeting period pointed to higher rates but the possibility of tighter credit conditions offset that, while the FOMC does not know the extent of the impact of tighter credit conditions and does not see the impact just yet which argues for being alert when considering future rate hikes. Powell also stated that participants do not see rate cuts this year in its baseline expectations and noted that if the Fed needs to raise rates higher, it will. Furthermore, he said for now, the Fed sees the likelihood of credit tightening which can impact the macroeconomy and he still sees a path to a soft landing which the Fed is trying to find.

NOTABLE HEADLINES

• US Treasury Secretary Yellen told lawmakers that the Treasury is not considering insuring all uninsured bank deposits. Yellen added they can debate whether to raise the FDIC deposit insurance limit but are not going to talk about that right now, but later stated that it is worthwhile for Congress to discuss changes to the FDIC deposit insurance and the Treasury is ready to work with lawmakers.
• FDIC is said to delay the bid deadline for Silicon Valley Private Bank with the bid deadline moved to Friday, while the FDIC expects to have an announcement of a decision on SVB this weekend, according to a spokesperson.
• JPMorgan (JPM) CEO Dimon met with White House economic council chief Brainard during a pre-planned trip to Washington DC.

APAC TRADE

EQUITIES

• APAC stocks traded mixed with price action choppy as markets digested the FOMC where the Fed delivered a widely expected 25bps rate hike and maintained its terminal rate view but dropped its reference regarding expectations that ‘ongoing’ rate hikes will be appropriate.
• ASX 200 declined amid the uninspired mood across most industries with underperformance in tech and mining.
• Nikkei 225 was contained by weakness in financials and after Japan maintained the overall assessment of the economy but cut the assessment on corporate profits and production for the first time since April 2020.
• Hang Seng and Shanghai Comp. swung between gains and losses with optimism in Hong Kong following earnings releases from Orient Overseas International and Tencent whereby the advances in the latter inspired its tech peers, although participants also digested a rate hike by the HKMA which moved in lockstep with the Fed.
• US equity futures (ES +0.5%) nursed some of the prior day's losses after the late selling pressure during Wall St trade owing to Treasury Secretary Yellen's testimony in which she stated that they are not considering or discussing insuring all uninsured bank deposits.
• European equity futures are indicative of a lower open with the Euro Stoxx 50 -0.4% after the cash market closed up 0.3% on Wednesday.

FX

• DXY was pressured and slipped below the 103.00 level in the aftermath of the FOMC where the Fed lifted rates by 25bps, as expected, but dropped its reference to ongoing increases in the target range and maintained its terminal rate view, while money markets are pointing to a rate cut later this year despite Fed Chair Powell explicitly stating that rate cuts are not in the Fed's base case.
• EUR/USD benefitted from the softer buck and rose above 1.0900 which also followed a deluge of ECB rhetoric.
• GBP/USD reclaimed the 1.2300 handle ahead of the BoE decision with recent tailwinds from UK CPI and the FOMC.
• USD/JPY extended on declines amid a retreat in the greenback and narrowing of US-Japan yield differentials.
• Antipodeans took advantage of the post-FOMC dollar weakness in the absence of any other major catalyst.
• PBoC set USD/CNY mid-point at 6.8709 vs exp. 6.8719 (prev. 6.8715)
• Brazilian Central Bank maintained the Selic rate at 13.75%, as expected, while it will remain vigilant and will assess if the strategy of maintaining the Selic rate for a sufficiently long period of time will be enough to ensure the convergence of inflation. BCB added that inflation expectations have shown additional deterioration, especially at longer horizons and they will not hesitate to resume the tightening cycle if the disinflationary process does not proceed as expected.
• BoC Minutes stated that ahead of the March meeting, it remained concerned that inflation could become stuck materially above target. Furthermore, they felt it was important to stress the conditionality of a rate hike pause and wanted to underline that it continued to assess whether monetary policy was restrictive enough.

FIXED INCOME

• 10yr UST futures remained underpinned as yields continued to decline following the post-FOMC bull steepening.
• Bund futures held on to their gains but with upside contained after the recent two-way price action and a slew of ECB rhetoric.
• 10yr JGB futures took impetus from global peers albeit with gains capped amid softer demand at the enhanced liquidity auction.

COMMODITIES

• Crude futures pulled back from yesterday's peak as risk appetite soured heading into the Wall St closing bell.
• Iran's Finance Minister said Iran achieved its highest level of oil exports for at least two years last month, according to FT.
• Nigeria raised April Bonny Crude OSP to + USD 1.04/bbl vs dated Brent and raised Qua Iboe OSP to + USD 1.34/bbl vs dated Brent.
• Spot gold mildly extended on post-FOMC gains as the greenback and US yields continued their retreat overnight.
• Copper futures were kept afloat as markets priced in a greater likelihood for the Fed to pause in May and cut later this year.
• Goldman Sachs said gold remains the best safe-haven asset for financial risks and raised its gold target to USD 2050/oz from 1950/oz, while it added that Chinese demand continues to surge across the commodity complex with oil demand topping 16mln bpd and it remains very positive on commodity prices with 12-month forecasted returns of 27.9% for S&P GSCI.

CRYPTO

• Bitcoin was choppy amid the mixed risk tone and after prices slumped below USD 28,000 post-FOMC.
• Coinbase (COIN) said it received a Wells notice from the US SEC on enforcement action alleging violation of federal securities laws and believes potential enforcement actions would relate to aspects of Co.'s spot market, staking service Coinbase Earn, Coinbase Prime and aspects of Coinbase Wallet, while potential civil action may seek injunctive relief, disgorgement and civil penalties, according to Reuters.
• US SEC is suing Tron founder Justin Sun on fraud and market manipulation charges, while it is also charging several celebrity backers of Tronix and BitTorrent crypto assets, according to CNBC.
• Binance is charging fees for Bitcoin trading gains, according to WSJ.

NOTABLE ASIA-PAC HEADLINES

• HKMA raised its base rate by 25bps to 5.25%, as expected, which is in lockstep with the Fed.
• RBNZ Chief Economist Conway said inflation is high and widespread because strong demand outstripped supply, while he added that they are incredibly determined to get inflation and inflation expectations back to the target. Furthermore, Conway expects monetary policy tightening to cause the New Zealand economy to enter a mild recession later this year as demand slows, as well as noted that the OCR is now comfortably above neutral and having the desired contractionary effect, according to Reuters.

GEOPOLITICS

• China's military said it monitored and drove away a US destroyer which entered the South China Sea Paracel Islands, although the US Navy later said that the Chinese military's statement is false regarding a US destroyer being expelled from the South China Sea.
• Taiwan's Foreign Minister said President Tsai's meeting with the US House Speaker is still being arranged, according to Reuters.
• Saudi Arabia and Iran's Foreign Ministers agreed to meet soon to pave the way for the reopening of embassies, according to the Saudi state news agency.

EU/UK

• BoE said in a letter to the Treasury Committee that risks remain that UK economic conditions might be affected by stress in the global banking system, while it said further volatility and sharp moves in asset prices could crystallise previously identified vulnerabilities.
• ECB's Muller said he does not see a big banking crisis coming, while he added inflation is still too high and the ECB should not hesitate to fight inflation.
• ECB's Nagel said further hikes are needed in coming meetings if inflation develops as projected, while he said the ECB’s job is not done yet and the bank must be bold and decisive. Nagel also said that uncertainty around the banking system has reduced in recent days and the ECB has all the tools to deal with liquidity issues.