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Daily FX Market Review: Dollar Rises After Fed Remains Hawkish

November 2, 2022| Forex Market

All eyes were on the Federal Reserve (“Fed”) today as traders waited for their release of the Federal Open Market Committee (FOMC) statement and the live press conference afterward with the head of the Fed, Jerome Powell (“JPow”).

As the market expected, the Fed raised interest rates by 75 basis points (0.75%). In an effort to beat back soaring inflation, this was the sixth rate hike this year.

This now brings the fed funds rate to a range of  3.75 to 4 percent.

Fed Funds Rate

Given that this was the fourth rate hike in a row where the increase was 75 basis points, what the markets really wanted to know was if the Fed would dial back the rate hike increase in their next meeting in December.

Specifically, traders were looking for any clues that would signal a smaller rate hike of 50 basis points instead of 75 basis points like what the Fed just announced for November.

Not familiar with central banks and interest rates? Read our lesson on Why Interest Rates Matters to Forex Traders.

Hawkish Fed

At the press conference, JPow hinted that the pace of hikes could slow as soon as next month, “That time is coming and it may come as soon as the next meeting or the one after that.”

Such a dovish remark was what the market wanted to hear. But then he added two things that were very hawkish:

  1. He added that they don’t plan to stop or “pause” raising rates anytime soon, emphasizing,  “it’s very premature to be thinking about pausing.” And that they have a ways to go.
  2. And then threw even more fuel on the hawkish fire by adding that the peak interest rate (“terminal rate”) might be higher than previously anticipated!

In a nutshell, his message was “Rates are going higher, and higher for longer.”

For the dollar bears, this is NOT what they wanted to hear.

Check out how the U.S. dollar index (DXY) reacted to his statements.

DXY Chart | 11/02/2022

Initially, the U.S. dollar weakened after the FOMC statement was released as markets interpreted it as dovish and a signal that future rate hikes would be made in smaller increments.

But when JPow stepped to the podium and the press conference started, he started laughing at the market’s wrong interpretation.


Okay, that didn’t really happen but he might as well have.

Let’s review what else happened in the FX market today…

Currency Market Movers

Which currency pairs gained the most today?

As shown by our FX Market Movers page, USD/CAD was the leader of the pack, gaining 0.59% or 80 pips. 🙌.

Top FX Gainers | 11/02/2022

Which currency pairs lost the most today?

GBP/JPY.was the biggest loser, falling 1.05% or over 179 pips! 🔽

Top FX Losers | 11/02/2022

Currency Strength

What was the overall strength or weakness of individual major currencies today?

Based on the Currency Strength Meter on MarketMilk™, JPY was the strongest currency. 💪

The British pound (GBP)) was the weakest currency.

The Bank of England (“BoE”) meets tomorrow. While the current market consensus is for a rate hike of 75  basis points (0.75%), there’s the potential scenario of them being more dovish than expected and only hiking by 50 basis points (0.50%). This would be very bearish for GBP so something to keep an eye on.

For more information, read my Event Trading Guide: BOE Monetary Policy Statement.

Currency Strength | 11/02/200

Currency Short-Term Trends

When it comes to short-term trend strength, the New Zealand dollar (NZD) is the only currency clearly showing bullish strength.

The euro (EUR), Australian dollar (AUD), and Canadian dollar (CAD) have the most bearish trend strength.

Currency Trend Strength | 11/02/2022

Currency Volatility

Which currency was the most volatile today?

Based on our Currency Volatility Meter, it’s the U.S. dollar (USD). 

Given the FOMC statement release and Fed press conference today, this wasn’t a surprise.

Currency Volatility | 11/02/2022

Which currency pair was the most volatile today?

Given that the USD was the most volatile currency, it has to be a USD pair. But which one?

AUD/USD. From its high to low, it moved over 2.28% or over 144 pips! 

Most Volatile Currency Pair | 11/02/2022

Are you bullish or bearish on AUD/USD?

Is AUD/USD a buy or sell?

Here’s what MarketMilk™ indicators say…

Buy or Sell AUD/USD on 11/02?

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