Global financial markets moved hard to price in the latest Fed action last week when Mr. Powell’s Federal Open Market Committee raised the US benchmark interest rate by 75 basis points. A jumbo rate hike dampened inflation expectations, and may restore some credibility to the institution. However, the impact on the stock markets was undoubtedly bearish. The Dow Jones Industrial Average (DJIA) fell more than 4% to its lowest level since November 2020.
The US dollar benefited from safe haven flows despite the immediate reaction to the downside. The DXY is up 0.50% over the weekend. However, there are technical signals across major crosses, such as EUR/USD, GBP/USD, AUD/USD and USD/CAD, that the dollar’s rally may be at or near a critical juncture. The Bank of England remained relatively peaceful, raising its benchmark interest rate by 0.25%. The Dollar advanced against the Pound, but pared some of those gains in the second half of the week.
Oil prices fell on Friday as traders grew increasingly concerned about a recession caused by the Federal Reserve. It comes amid the summer driving season, which typically sees high fuel demand continue into the fall months. Natural gas prices found relief in the United States after an LNG plant suffered a catastrophic failure, likely to take months to fix. European prices, however, have jumped dramatically. The development is likely to drive up prices in Europe, further complicating inflation expectations in Europe.
Speaking of energy prices, Canada is set to release inflation data for May on Wednesday. The country’s Consumer Price Index (CPI) is expected to outpace wires at 7.5% YoY. That may be up from the 6.8% year-over-year increase in April. A hotter-than-expected reading is likely to inspire the Bank of Canada’s already strong interest rate hike bets, which could support the Canadian dollar.
Japan is also due to release inflation data for May. The BoJ maintained its pessimistic stance last week against a market that appears to be trying to enforce the BoJ’s policy stance. This did not happen. The slogan “Don’t fight the Fed” seems to be a perfect fit for the Bank of Japan. The Yen fell against the Dollar last week, although the pace of losses is beginning to ease. A higher-than-expected CPI reading from Japan may push the USD/JPY lower.
The performance of the US dollar against. coins and gold
Australian Dollar Forecast: RBA hawkish is currently supporting the Australian dollar
The Australian dollar got a boost from the hawkish Reserve Bank of Australia all of a sudden, indicating a path for a much higher rate. If Commodities Hold And China Eases, Will AUD/USD Go Up?
Gold Price Forecast: Gold in the range of rates and the inflationary tug of war
Gold is on its way to its first weekly drop in a month. However, range trading is likely to continue.
Euro fundamental outlook: ECB emergency meeting, anti-collapse tool and gas turmoil
The euro faces many challenges as Russian gas supplies dwindle and the European Central Bank does little to calm the bond market tension after the unfavorable signal of an anti-collapse tool.
Sterling Weekly Outlook: Inflation under the microscope once again as sterling weakness continues to hurt UK consumers
The British pound has resisted this week but the strong dollar continues to cast a shadow over the greenback, while the upcoming economic data should maintain the current volatility in the GBP/USD pair.
Oil price outlook: Oversold appears to be overbought, tight energy market supports recovery
Oil was sold off during the week and fell to its lowest level in nearly a month on growing fears of a recession, but the commodity may rebound soon, buoyed by the tight energy markets.
USD/JPY Forecast: All eyes on Fed testimony as BoJ sticks to easing cycle
Developments from the US may affect the USD/JPY in the coming days as Chairman Jerome Powell is scheduled to testify before Congress.
Fundamental Outlook for the US Dollar: DXY Eyes Powell Testimony, Economic Data
The US dollar is coming out of a busy week full of Federal Open Market action, but the economic calendar remains full of event risks. Mr. Powell’s testimony is among the most important.
Dow Jones, S&P 500 and Nasdaq 100 Indices for the Next Week – Not Looking Good
The Dow, S&P 500 and Nasdaq 100 fell after the Federal Reserve stepped up efforts to tame hyperinflation by raising interest rates by 75 basis points. The economic calendar is light, but the volatility is still ripe.
Standard & Poor’s 500, Nasdaq, Dow Jones forecast for next week
Stocks fell to new annual lows after this week’s Federal Open Market Committee meeting with key support targets now in sight. Important levels on the weekly technical charts of the S&P 500, Nasdaq and Dow.
US Dollar Technical Outlook: EUR/USD, GBP/USD, AUD/USD, USD/JPY
It’s been a busy week for the US dollar, and the currency continues with an uptrend as the Fed remains the toughest game in town.