The Federal Reserve (Fed) left interest rates unchanged in the range of 3.50%-3.75% on Wednesday, with an 8-4 majority vote, marking the first instance of four dissenting votes since October 1992. Three rate-setting members advocated moving away from an easing bias, citing elevated inflation risks, particularly due to rising global energy prices. Fed Chair Jerome Powell emphasized vigilance to risks on both sides of the mandate and noted that the energy surge has not yet peaked, while developments in the Middle East are contributing to uncertainty [1][2][3].
Following the Fed's hawkish tone, Morgan Stanley revised its outlook, now expecting no rate cuts through year-end, citing persistent inflation and economic resilience as key reasons for the change. Previously, the firm had projected two 25-basis-point cuts in September and December [3]. The CME FedWatch tool reflected diminished expectations for a rate cut, with odds falling to 3.3% from 18.4% seen on Tuesday [1].
The US Dollar strengthened against major peers, with the USD/INR pair hitting a record high near 95.35 as the Indian Rupee plunged, driven by surging oil prices and the Fed’s hawkish stance. WTI Oil traded almost 1% higher at around $107.00, the highest level in over seven weeks, following US President Donald Trump’s announcement to prolong the naval blockade on Iran until a nuclear deal is secured. This blockade has contributed to the supply crisis and boosted oil prices, impacting currencies of oil-importing economies like India [2]. The USD/CHF also extended gains for the third consecutive day, trading around 0.7920, supported by safe-haven demand and the Fed’s hawkish tone [3].
Silver (XAG/USD) rebounded 1.5% to near $72.35 after posting a three-week low at $70.86, but the outlook remains uncertain. The near-term tone is bearish, with price holding below the 20-day EMA at $75.43 and RSI around 41, indicating persistent downside pressure. Higher oil prices and diminished prospects for Fed rate cuts undermine silver’s appeal as a non-yielding asset. The ongoing decline could extend towards the April 7 low of $68.28 unless resistance at $75.43 is reclaimed [1].
Swiss Survey Expectations improved to -30.3 in April from -35.0 in March, with more than half of respondents expecting stability over the next six months, while slightly over a third anticipate deterioration. The March KOF Leading Indicator is due later in the day [3].
CONCLUSION
The Fed’s hawkish hold, coupled with surging oil prices due to geopolitical tensions, has led to significant currency volatility and pressured precious metals. The US Dollar strengthened, hitting record highs against the Indian Rupee and maintaining gains against the Swiss Franc, while silver remains vulnerable to further declines. Market sentiment is cautious, with diminished expectations for Fed rate cuts and ongoing uncertainty from global energy developments.