FED Interest Rate Hike Impacts Equity & Currency Markets; S&P 500 Futures, EUR/USD and GBP/USD Crater

The FED hikes rates today for the first time this year. The 0.25% hike cratered equity and foreign currency markets, while the dollar appreciated substantially in the hours following the news. The S&P 500 futures market hit an intraday low of 2248.25, closing down 24.72 points (-1.09%)!

One of the biggest casualties of the FED rate hike was the gold market, which dropped about $31, hitting a low of $1136 on the day. While the market has recovered somewhat in the Asian trading session, gold was the second-biggest loser in percentage terms (-2.67%).

The Japanese yen was the biggest loser of them all, dropping a whopping 2.68% against the greenback.

The EUR/USD and GBP/USD dropped 1.88% and 1.63% respectively, while the Canadian dollar lost about 1.85% against the U.S. dollar.

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  1. The currency and asset moves are in keeping with traditional economic theories of how to respond. Basically it is old school thinking from a pre-negative interest rate era, that is to say a "gut feeling" response out of proportion to a change which has been signalled for some time. Expect to see the market correct itself after a thoughtful weekend. Economies no longer respond to interest rate movements as they once did. It is now a much more sophisticated and economically interlocked world.

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  2. Typical automatic responses to a preordained rate hike. The market will settle again in no time.