US dollar rises on Monday as investors preempt a series of key central bank interest rate decisions expected to result in further monetary policy tightening by the US Federal Reserve (Fed) and Bank of England (BOE) and stocks fell.
The dollar rose 0.5% against a basket of other currencies, Strong surge in recent months This was accelerated by rising US interest rates.
Global stock markets fell as the Fed met later this week and expected further rate hikes. Futures tracking the broad S&P 500 index fell 1% ahead of its opening on Wall Street, while his Stoxx 600 across the European region fell 0.5%.
Monday’s pessimistic performance came after MSCI’s Developed and Emerging Markets Equity Barometer broad index fell 4% last week, its biggest weekly drop since June. Concerns about the health of the global economy and the possibility of further significant rate hikes by major central banks are worrying investors.
“This week feels like a win or miss week. I’m still worried about the price changes we made last week. And it doesn’t mean the sentiment is changing for the better at all,” said Lombard Odier. Chief Economist Sammy Charl said.
A surging dollar hit the pound, dropping to $1.14.
“Currency markets probably best sum up how close we are to some breaking point,” Charl said. “The big question is whether we’ll get a positive signal from central banks about when the rate hike cycle will peak .
Wall Street’s consensus expectation is that the Fed will raise interest rates by 0.75 percentage points at the end of Wednesday’s two-day meeting. Market expectations for his third straight rise of that magnitude were bolstered by last week’s data showing US consumer price inflation fell short of his August forecast.
Federal funds futures-based pricing suggests the Fed will raise the key rate to 4.4% in early 2023 from the current 2.25-2.5% as policymakers try to keep inflation in check.
Investors fear that the central bank’s efforts to curb inflation by tightening monetary policy could send the U.S. economy into recession as debt service costs rise for corporate and individual borrowers. .
In Europe, gas prices fell more than 5% as weaker economic activity is expected to reduce energy demand.volume of stored gas Hopes have risen that Russia can avoid energy rationing over the winter after slashing gas supplies to the EU.
The Japanese yen fell 0.3% against the dollar to ¥143 after reaching a 24-year low last week before the government stepped up verbal interventions aimed at calming the country’s currency market. became.
The Bank of Japan is due to make its latest policy decision on Thursday. Most economists expect the BOJ to stick to its policy of keeping its 10-year JGB yield near zero.
The BoE is also set to release its latest decision on interest rates on Thursday, with consensus forecasts among City of London analysts showing a 0.5 percentage point rise.
Asian stocks also fell, with the MSCI index of stocks in the region down about 0.5%. UK and Japanese stock markets were closed for a public holiday.
https://www.ft.com/content/37685296-3a9e-42f7-8531-ee4a81c0c810 US Dollar Continues Rise Ahead of Key Rate Decision