On Wednesday (September 21), the U.S. dollar index fluctuated within a narrow range in early Asian trading, and was currently trading around 110.18, holding on to most of the overnight gains; the U.S. dollar rose to near a 20-year high on Tuesday, as investors prepared for another Federal Reserve A major rate hike was also the main focus of this week’s intensive central bank meetings. The U.S. dollar against the Canadian dollar remained near a nearly two-year high set overnight, and the Canadian core inflation rate fell. The U.S. dollar against the Canadian dollar rose 0.88% on Tuesday, hitting a new high of 1.3374 in the past two years.
The Fed began its two-day meeting on Tuesday, with interest rate futures traders pricing in an 83% chance of a 75 basis point hike and a 17% chance of a 100 basis point hike.
It was up 0.5% at 110.19 late on Tuesday, just off a more than 20-year high of 110.79 hit earlier this month and on track for its fifth weekly gain in six.
The dollar has surged about 15% so far this year, on track for its biggest annual percentage gain in 41 years.
“It’s hard to see a top for the dollar right now, and short-term factors are driving demand for the dollar: weak risk appetite, fears of a global recession, a hawkish Fed, and Ukraine war etc. Once U.S. inflation peaks and the global economy bottoms out, the dollar will turn lower, but we’re not there yet.”
Also on Tuesday, Sweden’s central bank raised interest rates by 100 basis points, more than analysts had expected, causing the krona to briefly surge against the euro and dollar.
butSwedish KronaCouldn’t hold on to this wave of strength. The euro extended recent gains against the crown, climbing to a fresh six-month high of 10.8808 crowns. EUR/SEK was last up 0.6% at 10.8630. The dollar also climbed 0.6% against the crown to 10.8994.
ING’s currency strategist Francesco Pesole said. “In a way, this was an attempt by the Riksbank to boost the krona and it failed, which is not surprising.”
He said the relationship between the European currency and central bank policy had been broken, with markets increasingly trading on Europe’s energy and growth prospects.
U.S. two-year Treasury yields, which are sensitive to interest rate policy expectations, rose as high as 3.992 percent, the highest since November 2007, providing additional support for the dollar.
It slipped 0.53% to 0.9968 on Tuesday, after falling to $0.9864 on Sept. 6, its lowest level in 20 years.
The euro failed to get a boost even after the ECB or Lagarde said the bank may need to raise interest rates to levels that limit economic growth to cool demand and combat unacceptably high inflation. (Full Story)
It fell 0.45% to end at 1.1379 on Tuesday. The Bank of England will announce its interest rate decision on Thursday, with investors divided on the possibility of raising rates by 50 basis points or 75 basis points.
The Bank of Japan is also meeting this week, but is widely expected to maintain its ultra-easy stimulus – including fixing the 10-year yield around zero – to support a fragile economic recovery.
As a result of this policy, the yen has plunged nearly 25% this year, with USD/JPY up 0.36% late on Tuesday at 143.70, continuing a week-long consolidation trend after climbing to a 24-year high of 144.99 on Sept. 7. continue.
The Canadian dollar weakened sharply on Tuesday,The U.S. dollar rose 0.88% against the Canadian dollar on Tuesday, hitting an intraday high of 1.3374, the lowest since October 2020. Canadian inflation fell for a second straight month in August after data released on Tuesday showed Canada’s core inflation rate cooled, driven by a drop in gasoline prices, a welcome sign for the Bank of Canada that its move to raise interest rates may be working . The CPI rose 7% year-on-year in August, down from 7.6% in July and a four-year high of 8.1% in June.
Key data and outlook for Tuesday
Aggregate Viewpoints
[Keel Point chief economic adviser: The Fed is expected to raise interest rates by 75 basis points, an important step towards restrictive policies]
Steve Skancke, chief economic adviser at Keel Point, said the August CPI data won’t change the Fed’s hawkishness in fighting inflation, but expanding disinflationary pressures pushing inflation expectations back to normal levels may be enough to keep the Fed on hold for 75 basis points of rate hikes track. With the economy and consumer spending slowing, the odds of a one-percentage-point hike are “low”. Given that the Fed’s interest rate level is already at a “neutral” level, a 75 basis point rate hike would be an important step toward restrictive policy, and a larger rate hike would be an unnecessary risk to damage the U.S. economy, which has so far been is successfully moving in the direction pushed by the Fed.A 1-percentage-point rate hike would signal the Fed’s fears that inflation is out of control, implying a more aggressive policy response
Citibank: Canada’s core inflation risks remain on the upside
[JPMorgan Chase: “Dark Clouds” Are Building Up for the U.S. Economy]
JPMorgan Chase CEO Dimon: The U.S. economy is strong in terms of employment and consumer spending, but it is under pressure from inflation, supply chains, the conflict between Russia and Ukraine, and rising interest rates. Higher bank capital requirements are emerging as a significant economic risk. Economic “clouds” are building, but economists are divided over their severity.
ECB’s Lagarde: Interest rates may need to be raised to levels that limit economic growth
ECB President: Lagarde said the ECB may need to raise interest rates to levels that limit economic growth to cool demand and combat unacceptably high inflation. “If there is evidence that high inflation has the potential to de-anchor inflation expectations, policy rates consistent with our target will be in restrictive territory,” she said.
[HSBC: The euro is expected to fall below the new low of the year against the dollar in the next few weeks]
EUR/USD continues to consolidate near parity. But HSBC economists expect EUR/USD to break below new year lows in the coming weeks. While the pair finds support at parity levels, we expect EUR/USD to break below yearly lows in the coming weeks on the back of a stronger dollar and a host of challenges facing the Eurozone economy, such as recession risks and rising inflation. On the positive side, the risks posed by the upcoming Italian elections on September 25 do not appear to be significant, and we note that the tone of the Italian elections has been moderate, with no strong Eurosceptic component. If political developments in Italy pose downside risks to the euro, those risks are also unlikely to flare up this month.