The U.S. Dollar is trading in better ranges following a week that provided evidence the U.S. economy remains mostly stable despite the hawkish nature of Fed action in 2022.
Overview
Although hiking borrowing costs usually accounts for a contraction of economic activity, Gross Domestic Product as well as gauges of price growth have demonstrated resilience. As a result, the buck has gone back to gaining since this gives credit to the Fed and its Chairman Jerome Powell who have highlighted that the economy is indeed strong enough to handle both quantitative tightening as well as increases to the Federal Funds Rate, now sitting at 3.25%.The FOMC meeting for next week seems ripe for another 75-basis-points hike. Meanwhile, China’s path is worrying outside investors and companies who have relied on a government system that they trust. President Xi Jinping’s recent aid to Russia and his success in securing further power within his party and nation have turned some global leaders sour on the future. Domestically, many in the U.S. are scratching their heads over Amazon’s losses and the takeover of Twitter by Tesla’s owner Elon Musk.
What to Watch Today…
- No major economic events are scheduled for today
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EUR ⇑
The Euro fell in the last two trading sessions as markets reacted to the removal of some critical language in the European Central Bank’s message following their expected 75-bps hike. Officials no longer referenced the need to hike for “several meetings” in the upcoming months, which they had been willing to say prior. No matter what, prices in Euro-zone countries are not going down with the most recent German print jumping to 11.6%. Italian demands for better EU action on everything may also put downward pressure on the shared currency as a new month starts.
GBP ⇓
Sterling has calmed down in fluctuation a bit as the new Prime Minister and his advice on announcing a budget have already eased market concerns. For many weeks, markets wondered if the political crisis that developed in the U.K. would lead to a plummet in Pound value, but just as it has in the past, the currency has been steadfast in recovering its value. The Bank of England will meet next Thursday. Expectations are of a somewhat dovish hike.
