Fed Raises Rates 25 Basis Points and Warsh Signals Further Tightening, Sending Dollar Surging and Markets Lower

The Federal Reserve raised its benchmark interest rate by 25 basis points at its September FOMC meeting, a move markets had widely anticipated. The bigger market driver was commentary from Chair Kevin Warsh, whose signals about the future path of policy jolted financial markets and sent the dollar sharply higher.

The DXY dollar index surged 0.6% on Wednesday, its best single-day gain since June 17, the date of Warsh's first FOMC press conference. EUR/USD broke below the 1.1500 level and USD/JPY crossed above 156, with traders describing conditions across currency markets as broadly stressed. GBP/USD also fell sharply, with the British pound losing ground as Fed policy expectations overtook the Bank of England as the dominant driver for sterling. The British pound ETF FXB crossed below its 200-day moving average of $129.29, trading as low as $128.66.

The hawkish Fed tone rippled through equities and commodities. Gold fell to fresh one-month lows. Silver miners sold off, with the Global X Silver Miners ETF SIL dropping about 3.5% and crossing below its 200-day moving average of $90.49. Coeur Mining fell roughly 6.4% and Range Resources dropped about 6.9%, both breaking below their respective 200-day moving averages. AutoNation fell 4.5%, Simon Property Group lost 1.6%, FNB Corp declined 3.6%, and Ameris Bancorp dropped 2.6%, all crossing below their 200-day moving averages on the session. The iShares MSCI Germany ETF EWG also slipped below its 200-day moving average, suggesting the dollar strength and Fed hawkishness weighed on international equity exposure as well. WTI crude oil settled at $102.43 per barrel.