Overnight, while the US slept

Risk appetite came back, hard. US equities shook off the Fed-day wobble: the S&P 500 sits near 7,636 after a gain of roughly 0.6%, and the Nasdaq did better again, up over 1% with technology leading the bounce. The Dow lagged. Volatility collapsed — the VIX (Wall Street's "fear gauge") fell more than 11%. That is not the reaction textbooks predict the day after a hawkish central bank, and I think it matters.

Rates & DXY: The 10-year Treasury yield had reached 5% — its highest since 2007 — and eased back slightly to around 4.97%, snapping an eight-day rising streak. The 2-year, which tracks Fed policy expectations most closely, actually fell, to somewhere around 4.68–4.73% depending on the source. The dollar index (DXY — a basket measuring the US dollar against six major currencies) pushed up through the 100.00 mark on the hike, its first close above that level in weeks, then stalled just either side of it.

Note the shape, not just the level: the front end came down while the long end barely moved, which means 2s10s (the gap between 2-year and 10-year yields) steepened modestly on Thursday. The day after a hike that 16 of 18 Fed officials expect to be followed by another, the short end refusing to go higher is the market quietly saying we don't fully believe the rest of that path. That single detail is the most important thing on my screen this morning.

The dominant driver — the Fed hiked, and then the inflation shock started deflating. The FOMC voted 12–0 to raise the funds rate 25bp to 3.75%–4.00%, the first increase since July 2023, with Chair Kevin Warsh pointing to a strengthening economy, summer inflation that has not improved, and geopolitics. But within 24 hours the supply story that justified the hawkishness began to unwind: Saudi Arabia moved to restore the East-West pipeline struck by drones last week, and reports indicate it is pumping again at its full 7 million barrels a day. Brent fell from above $109 to a low near $102 before settling back around $104.75 — down roughly 4% from Wednesday's high. WTI trades near $101.19.

Apply the framework properly here. A supply-side shock (an oil spike from conflict — it raises prices and hurts growth) normally turns bearish for gold, because the central bank tightens, real rates (interest rates after subtracting inflation) climb, and the dollar gets both a haven and a yield bid. That chain worked perfectly on Wednesday — gold lost $100 in the decision hour. But the chain only stays intact while the shock persists and policy keeps reacting. Right now the shock is receding faster than the policy path is being repriced: oil is $5 off its high, the front end of the yield curve is coming down, and the Strait of Hormuz remains largely closed with the US-Israel-Iran conflict unresolved. Inflation risk fading while haven demand stays is the combination that flips gold from bearish back to bid. That, to my eye, is exactly what Thursday's price action was.

Gold: trading 4341.69 / 4341.89. Day range 4257.49–4381.44; prior-day high/low 4366.22 / 4235.07. Gold fell to 4235 in the post-Fed flush and rallied 146 dollars off that low to tag 4381 in the US afternoon — a complete round-trip of the hawkish surprise in a single session. It has since eased back to 4341 into the Asian reopen. RSI (a 0–100 momentum gauge; below 30 is oversold, above 70 overbought) sits at 40.8 on the 15-minute chart — soft, but that is a pullback reading, not a breakdown.

Crypto: Bitcoin 76,485.75 (RSI M15 46.5, ATR $155.53); day 75,569.51–77,087.89, prior-day H/L 76,478.41 / 74,927.01. BTC printed a higher low and a higher high against the prior session and is holding just above the prior-day high — constructive, though it is still down over 4% on the week. Ether 2,451.10 (RSI M15 46.9, ATR $7.19); day 2,383.38–2,479.58, prior-day H/L 2,426.08 / 2,363.88. Ether has the cleaner recovery structure of the two, steadying after the Fed and reclaiming 2,450. Working against both: roughly $1.11 billion of net outflows from US spot Bitcoin and Ether ETFs over the past two days, with money rotating toward Solana and XRP instead. Solana, for what it's worth, is the standout at 101.17 after taking out its prior-day high by a wide margin.

Key FX:

• EURUSD 1.14758 — RSI 44.5 (neutral), ATR 2.6 pips. Day H/L 1.14978 / 1.14553, prior-day H/L 1.15566 / 1.14610. The euro lost 77 pips in the Fed decision hour and has clawed back to the middle of the new range. It is trading like it wants to base, not extend.
• GBPUSD 1.33587 — RSI 51.3, ATR 3.5 pips. Day H/L 1.34064 / 1.33364, prior-day H/L 1.34980 / 1.33725. Sterling broke below the prior-day low and has not reclaimed it. UK retail sales land this afternoon Sydney time.
• USDJPY 155.964 — RSI 52.6, ATR 4.5 pips. Day H/L 156.313 / 155.335, prior-day H/L 156.416 / 154.838. This is the one. Dollar-yen jumped over 100 pips on the Fed and has spent Thursday chopping between 155.33 and 156.31 waiting for the Bank of Japan. At 156, with the yen this weak, MOF intervention (Japan's Ministry of Finance stepping into the market to buy yen) is a live tail risk on any spike.
• AUDUSD 0.71099 — RSI 42.5, ATR 1.7 pips. Day H/L 0.71263 / 0.70819, prior-day H/L 0.71399 / 0.70750. The Aussie got hammered 50 pips on the Fed and has recovered about half. Range-bound and, I think, uninteresting today.
• NZDUSD 0.57329 — RSI 49.0, ATR 1.7 pips. Day H/L 0.57503 / 0.57064, prior-day H/L 0.57672 / 0.57035. Same story as the Aussie, with less conviction.
• USDCHF 0.82460 — RSI 49.4, ATR 2.4 pips. Day H/L 0.82624 / 0.82228, prior-day H/L 0.82641 / 0.81758. The franc gave up a lot of ground on the hike and is stabilising mid-range.

Cross-asset snapshot:

Asset	Now	vs Prior Close	Vector
S&P 500	7,635.8	~+0.6%	Risk-on
US 10Y	~4.97%	Easing from 5.00%	Marginally dovish at the margin
DXY	~100.0	Up through 100, then stalled	Strong but losing momentum
Gold	4,341.79	−24.4 vs prior-day high, +106.7 vs prior-day low	Bullish — supply shock fading, haven bid intact
Bitcoin	76,485.75	+7.3 vs prior-day high, +1,558.7 vs prior-day low	Constructive, ETF flows a drag
Brent	~$104.75	~−4.2% from Wednesday's high	Saudi pipeline restored to full capacity

Normal session liquidity, but note this is the third Friday of the month — September quarterly options expiry in the US. Expect pinning and awkward flows into the New York close.

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