Fed Pauses Rate Hikes

U.S. 10-year bond yields were little changed today, after the
Fed paused rate hikes, but said that inflation was still an issue. Yields
have been at multi-month lows on expectations that the Fed would stop the rate
increases to deal with a slowing U.S. economy. The Fed pause had already
been priced into bonds, as traders had been betting on a slowing economy after a
number of economic reports showed smaller growth. Despite inflationary
risk, most traders and investors believe that the Fed is done raising rates for
some time, and should not be expected to hike in September.

The Dollar followed through on the downside today, sliding
against both the euro and the yen. The rate pause today secured a bearish
outlook on the dollar for the rest of the year, with the ECB and BoJ both slated
to raise rates before the year is out. The ECB’s hike last week helped
solidify this position, as a cooling U.S. economy looks to hamper the dollar’s
value in the global markets.

Crude oil futures fell 0.8% to close at $76.34 on news that
U.S. crude stockpiles are large enough to cover for shutdown of a major Alaskan
oil pipeline. Inventories were up about 10% from the 5-year average for
the period, giving investors confidence that a major energy shortage is not in
the immediate horizon. Natural gas surged over 4% after an unexpected
slide that occurred yesterday.

The metals fell slightly across the board. Gold was down
0.3%, silver was down fractionally, copper was down fractionally and aluminum
was unchanged.

Softs traded mixed for the day. Cocoa was up 1%, coffee
fell fractionally, orange juice fell 0.7% and sugar dropped nearly 2%.

The grains traded mostly lower today. Corn fell 1.6%,
wheat fell 2.3%, soy fell 1%, and oats gained fractionally, up 0.3%.

Meats traded higher today, with cattle up 0.1% and potbellied
pigs up 0.8%.


Economic
News

Fed Keeps Benchmark Interest Rate At 5.25% (full
story
).

Productivity And Labor Costs Rise More Than Expected In Q2 (full
story
).

John Patrick Lee