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Greenback Gains Amid Risks of Stock Crash
Like the Fed, the European Central Bank also raised interest rates for a fourth time. Although the policy move was less than two meetings in a row, it promised further increases and outlined plans to drain cash from the financial system.Greenback Weakens Gold Creeps Up
Interest Rates Surge, Dollar Slumps to Lowest Level!
ECB President Christine Lagarde said at a press conference that rising inflation is still there, but requires further tightening. The BoE raised its key interest rate by half a percentage point on Thursday and indicated the possibility of further increases. However, investors are betting that the BoE may be nearing the end of its borrowing cost hikes.Washington senior market analyst Joe Manimbo said that both the Fed and the ECB are giving more hawkish rate guidance, adding to recession fears. He added that the dollar boost comes from the Fed not raising rates and Powell setting a high bar for lowering rates. The Fed is projecting an additional 75 basis points to raise borrowing costs by the end of 2023. The projected federal funds rate is targeted to increase by 5.1% next year, slightly higher than investors had expected.
Powell was very hawkish in his comments. He noted that the ongoing rate hikes are appropriate to be in a fairly limited manner. In a research note from J.P. Morgan Asset Management, it was noted that the probability of a recession has increased to 60% from the initial estimate of 50%. Bob Michele, Chief Investment Officer of J.P. Morgan said that the Fed raised interest rates the fastest in the 1980s and the rest of the world followed the Fed's lead. The policies that followed were like early quantitative easing, but inflation was still high.
In afternoon trade, the US dollar rose from a two-week high against the Japanese yen. The latest reading was 137.665, up about 1.6%. Earlier, the euro hit its highest since June 9 at $1.073 after the ECB decision. Earlier reading showed it had fallen to $1.062, down about 0.5%.
The dollar index, a measure of the greenback against a basket of currencies, rose 0.9% to 104.53. The greenback briefly pared gains after data on Thursday showed U.S. retail sales fell more than expected in November, while the labor market remained tight with the number of Americans filing for unemployment benefits falling last week. Sterling also fell sharply as investors bet the Bank of England would raise interest rates closer to the end of the year.
The latest data showed a drop of almost 2% to $1.218. The dollar jumped 1.5% against the Norwegian currency to 9.866. The Swiss franc also fell after Swiss National Bank President Thomas Jordan said it was too early to “give clarity” on high inflation after the central bank raised interest rates again on Thursday and signaled further increases were possible.
European Stocks Rise: FED May Slow Rate Hikes!
The SNB raised its policy rate by 50 basis points to 1% - the central bank's third increase this year as it steps up its campaign to cool rising prices. Dollar Last Up 0.4% Vs France at 0.9285 The Australian (AUD) and New Zealand (NZD) dollars against the dollar (USD) fell.Australia fell 2.3% to $0.6702, while New Zealand fell 1.8% to $0.6345. Dollar Jumps 1.5% Against Norwegian Currency to 9.866 The Swiss franc also fell after Swiss bank chief Thomas Jordan said it was too early to give clarity on high inflation. The SNB raised interest rates by 50 basis points to 1%, the central bank’s third rate hike this year as it steps up its campaign to cool rising prices.
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