Markets were surprised by the Fed’s commitment to retain the core of its plan to tighten monetary policy, despite rising uncertainty about global economic growth, sending Wall Street stocks tumbling and depressing Asian equities. The Fed raised key overnight lending rate rates by 0.25 percent point as expected to a range of 2.25 percent to 2.50 percent. Further rate hikes would be necessary in the year ahead, with its policymakers projecting two rate hikes on average next year instead of three they saw back in September, a change that was also largely in line with expectations. But the slight revision was not enough to ease market fears over a further U.S. economic slowdown on the back of trade tensions, a waning boost from tax cuts and tightening monetary conditions for companies.
In main currencies, dollar steadied in Asian trade after the Federal Reserve stepped back from a more aggressive policy tightening path even as it gave markets the distinct impression of being much less cautious than they had anticipated.
EUR/USD was steady versus the dollar at $1.1380. The single currency was supported by news Italy had struck a deal with the European Commission over its contested 2019 budget. GBP/USD added 0.1 percent at $1.2619. The Bank of England is due to hold its final policy meeting of the year on Thursday, where markets expect the central bank to stay on hold. USDJPY retraced from its recent highs and break through the 112.00 support. The Bank of Japan (BoJ) delivered another rock-steady interest rate decision today along with an unflinching monetary policy statement despite the Japanese central bank recently having to walk back their growth and inflation forecasts for 2018’s year-end figures, and investors continue to drag their heels into the safe-haven Yen as growth figures around the globe continue to sour.
In commodities, Oil prices fell early in the morning to erase most of their gains from the day before, resuming declines seen earlier in the week amid worries about oversupply and the outlook for the global economy. While oil production cartel OPEC and its allies pledged to keep slashing output next year. OPEC’s de-facto leader Saudi Arabia said the organization, Russia and other oil producers will keep curbing output in 2019 to avoid a global glut. U.S. crude contract dropped 2.3 percent to $47.07 per barrel, while international benchmark Brent crude futures were down 1.9 percent at $56.18 per barrel.