 Okay, I hope you're doing well. We've just gone through the close on the New York Stock Exchange So I just thought I'd jump on and give you a quick update and review of what exactly the FMC have just announced where as you can tell By the headlines, they've just hiked interest rates by 25 basis points the first rate hike since 2018 very much as expected in terms of their forecasts which they released in this particular meeting I'll delve into those in more details But for the infamous dot-plot matrix indicative then of a six further rate hikes to come for this year Pretty much in line with market expectations But despite that we did see some pretty large two-way price action initially equities Selling off the dollar in USC old spiking only then to completely reverse that going through the press conference and actually Finishing substantially higher in US equities by the closing bells. So what exactly happened first off then let's just take a look at this The the Fed height interest rates by 25 basis points as I said It's the first time as you can see here that they've lifted rates since 2018 so here we are here Perhaps a little bit of context helps and so let's go back and rewind the clock over the last 22 years or so to see the last few cycles that we've had of rate increases and Here was the financial crisis and the reaction to that as rates plunge to zero interest rates up policy Then we had the kind of graduated and very cautious Incline of rates under the Janet Yellen period then of course the economy started to roll over and COVID hit at the beginning of 2020 and we went right back to that point So as you can see here and as per the typical way of which markets tend to function The actual execution of today's move sure we've had a little bit of volatility on the initial release But overall fairly contained when you think about all of the talk prior to the Ukraine Russia situation About are the Fed's gonna hike 50 basis points and the kind of laser focus on that as an issue They've executed the first of as I said What is going off historical precedence like to be a sequence of rate rises and the markets actually rallied in the end? so What exactly has happened? Well a couple of other things to be aware of the actual vote here There is nine voting members on the FMC and their vote was eight one So there was one dissenter that dissenter was a chap called James Bullard Which I'm sure many of you are familiar with he's kind of the outline uber-hawk and he wanted a 50 basis point move He's been calling for that for some time. It doesn't come as a surprise At all so we kind of flip over and let's have a look at the a couple of different things Let's start with this which is the actual economic projections that come out of the Fed So if you're not familiar with looking at these this is when they outline every alternate meeting So four times a year in March, June set deck their economic projections for GDP unemployment PC inflation and of course the the dot plots which we'll go back and look at so again Unsurprisingly they've downgraded the change in real GDP from the last time We had these numbers back in the end of 2021 in December So they now see that at 2.8 percent from 4 percent But they then see that kind of leveling out back to exactly where it was part prior to This whole situation has happened with the extension of the commodity squeeze on Ukraine And growth going back on to trend as they previously thought in 2023 and 2024 Unemployment remains very much largely unaltered It's PC inflation where the predominant change has come But that was very much as people were expecting so a sharp up tick given all of the inflation in pressure that we're seeing at the moment globally Supply train disruptions already very much present and then on top of that this later squeeze that we've had on the Russian situation So they now see that at 4.3 percent from 2.6 a substantial upward revision The Fed actually said they're attentive to the risks of further upward pressure on inflation and Inflation expectations I think that's quite an important comment for them to make because it kind of shows that they're They're proactive and their willingness to be assertive over the main issue That markets are quite fearful and anxious about at the moment So I think that's actually a positive step even though in a sense it's talking in a much more hawkish manner I think what the Fed are trying to do there is show and exert a degree of control that they have on the situation Despite the enormous challenge that they have at hand Few other things then that they said they did say they anticipated that the ongoing increases in the target range Will be appropriate but repeated they're pledged to be nimble and again kind of fits into the same explanations I just said about inflation so here you can see and perhaps it makes more visual sense to look at it in the form of the Dot plots what we have seen is a market increase in where they see interest rates in the nearer term and then kind of Actually decreasing further out in the longer term So again looking to get on top and tackle this this issue they're confronting at the moment on the big surge that we're seeing In inflation The other thing that a lot of people look at is the balance sheet So in terms of the sequencing is kind of the end of active Bomb buying so treasuries mortgage-backed securities as they're doing then executing in in combination with this the rate hike And then the series of rate liftoff from there thereafter But then about quantitative tightening so not reinvesting the principles for the expiring bonds that they have on their Swollen kind of balance sheet at the moment and what they said about that which is at the size of 8.9 trillion u.s Dollars I must remind you at this point in time is they're going to shrink that at a Quote coming meeting without Elaborating and I guess that's keeping the ultimate flexibility card on the table And I think that's probably the right sensible strategic move to make given the uncertainties that we're seeing At the moment on the geopolitical side The evolving situation that's happening with COVID in China Subsequent impacts that can have on global supply chains Probably that that's sensible that they don't commit to any definitive timeline at this point Then on the issue of Ukraine He did comment on that in the press conference he acknowledged that geopolitical Uncertainties clouding the outlook and emphasized that the conflict is likely to put additional Upward pressure on near-term inflation remember they aggressively hiked that near-term inflation forecast And did say that that's going to have an impact at home, but also way on economic activity as well so What happened then on the charts and I guess let's flip it over and I've got here two charts I just want to focus on one is Euro dollar the Euro dollar future currency pair So you can see here This is where we dipped initially on the dollar strength and then rallied into the US close This is the nasdaq and actually the nasdaq finished the session up 3.3 percent This is the beginning of the session today. So if I'm just going to mark this up here This is where the european trading day started. This is when the Well, just just go back rewind a little bit. This is yesterday morning So this is the two-day move that I want to look at because the s&p has actually had its biggest two-day rally Since april of 2020 so this was yesterday and then the us came in This european came in this morning was here and then we had the lift going through The latter part of the us sessions This is when went through the us trading morning And then we had the volatility the initial down tick on the fmc And then the subsequent powerful rally that we've had to close things out up at this level at around the 14,000 in the futures and if we look at that on the daily continuation um, you know just to put this in a bit of Perspective, you know people were very worried and banks obviously Re-evaluating the situation as it's evolving quite rapidly and downgrading their outlooks for us equities And we were seeing a sell-off to the magnitude of around 23 percent From low to high of where we were trading at november of last year But in the last two days alone looking at the nasdaq here We have really the best part of about eight and a half percent from those lower bound levels Having found some support two days ago Which really was the commencement of this rally at around those may double bottom that we saw Going back to to last year and what's been the rationale there? Well, really it's kind of twofold in my mind. One is the situation. What's happening in ukraine The latest is that ukraine has said that the ft article Which is one that came out earlier today that reported ukraine and russia had made significant progress on a tentative 15-point peace plan including a ceasefire and russian withdrawal Now at the time when that came out during the early part of u.s. Trading hours the market loved it stock started rallying So on and so forth. However, ukraine has come out and basically stated that they've denied that and it only represents the russian position and Therefore it's still unresolved to me on that matter because I think these are the two important points Which really ultimately underpinned this really resurgent equity market of the last two days Is that there's no smoke without fire and ultimately I think it's in both parties interests They look to strike a deal in the coming days or weeks I think a lot of that stop clock probably tied to the grace period of the likelihood of russia Not paying down on some of that dollar debt that's come due The latest on that was the payment on russian government dollar bonds with coupons due today Was not posted by the close of business in london. I thought that would be the case I would say that that's a good marker in my mind That that next 30 day period of when this this ceasefire and troop withdrawal agreement needs to kind of come through They've made quite considerable progress when you kind of look through beyond the headlines Over the course of the last week and I think that that will continue That's not to say it's not going to be without some two-way price action and a lot of headline noise to get to that point And then the second point which I think really explains this lift and really is why the rally was so powerful I think of all the challenges that central banks have particularly that of the f mc and drone power at the moment I think what they've done today is be very assertive They've talked about this idea that they're attentive to the risks of further upward inflation They continue to be nimble and so a lot of this talk I think is them just trying to say that look We're going to do what's necessary to tackle inflation and that's the At the forefront of I think the biggest risk to markets here And the fact that they've kept open the ability to be flexible with that I think is about as optimum as you can get with the challenges that they're facing at the moment Don't forget you've got the bank of england tomorrow So I'll drop a link in the the notes of this video Don't forget to sign up to the market maker newsletter Which I put out at the end of every european trading day I'll update you on the bank of england as well then but they're very much as well expected to hike rates That should come as no surprise to anyone And it will be the third rate hike in a row that we would have seen from the bank So yeah, look forward to it. Have a good evening and I'll catch you for the next video. Take care