Key Takeaways with Craig
US Equity prices began the day in positive territory then moved higher this afternoon after the much anticipated FOMC decision to raise its target Fed Funds rate by 75 basis points. Stock prices continued even higher as Federal Reserve Chairman Jerome Powell spoke and closed near the highs of the day. Somewhat unsurprisingly, given the price rally, implied volatility in CME Group’s Equity Index options markets declined and is trading at levels we haven’t seen since mid-April.
The US Treasury Yield Curve steepened a bit according to CME’s Micro Treasury Yield contracts. According to those futures prices, the 2-Year Yield declined by about 4.5 basis points while the 10-Year was about steady on the day and the 30-Year Yield rose by about 4.5 basis points. However, the 2-Year continues to yield more than the 10-Year, currently, by about 20 basis points.
In other CME Group markets, WTI Crude Oil futures prices reversed recent declines and were up by over 3%, while Natural Gas futures prices reversed recent increases and were down by about 2.5%, though remain historically high. Gold futures prices rallied a bit while Copper prices were up by about 2.5% at CME. Finally, most major Foreign Currency prices gained relative to the US Dollar in CME’s futures markets. As you can see in the QuikStrike graph below, the Euro FX futures price (orange line) has come off of near 20-year lows as it traded down to parity with the US Dollar, but remains relatively low and implied volatility in the options (blue line) has come off of recent highs but remains elevated versus the last six months.
Of course, even though the FOMC decision has passed, we still have the GDP number, scheduled to be released tomorrow morning, that will give us the latest read on the strength of the US economy. We’ll be back reporting on the impact tomorrow.
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