The biggest losers and the biggest winners from the Fed’s interest rate hikes
- At its policy meeting on Wednesday, the Fed raised interest rates by 0.75 basis points.
- The following two trading days after the announcement was tough for some indexes and a little quiet for some other pairs and commodities.
- The energy sector wasn’t spared from the impact of the interest rate rise.
The prior week in the market was as hot as our summers have been in recent years. Surely, this was not due to climate change, but rather the Fed’s Wednesday announcement of an interest rate hike, which had a big impact on the market.
However, as the saying goes, disasters in some regions bring opportunities in others. The hike in the interest rate pushes investors to withdraw their liquidity from the market and makes the borrowing cost higher for them, causing them to avoid risky investments due to the safe-haven money that could come from risk-free banks’ interest returns.
Let me begin on a positive note by discussing the main beneficiaries of the FOMC’s action to tackle excessive inflation levels. As a result, the dollar index concluded the previous trading week with a weekly gain of 0.48 percent. The DXY reached a level not seen since December 2002, which was at 105.788, before completing the trading week at 104.650. The DXY compares the US dollar to a basket of currencies, indicating that demand for the dollar increased in the previous week and may increase further in the coming weeks.
On the other hand, the rise in interest rates has affected the investor psyche in the form of anxiety about an economic slowdown or recession. Additionally, there are additional elements that influence the sentiment of investors, such as international conflicts.
As a result, the precious metal gold, which is regarded as a safe-haven asset, has experienced some rise. The price reached a low of 1813.53 on Wednesday, which coincided with the FOMC announcement time. This was followed by a spike that pushed the price higher before it tumbled and ended the week above the levels that occurred while the Fed spoke, at 1840.02, an increase of 1.461 percent from the lows reached during the speech.