Dollar falling at incredible rate after Fed’s comments
2023.02.02 02:11
Dollar falling at incredible rate after Fed’s comments
By Ray Johnson
Budrigannews.com – Even though the Federal Reserve reiterated its commitment to continue raising interest rates, the dollar fell to a nine-month low against a basket of currencies on Thursday. Markets bet that the resulting economic headwinds will force the bank to cut rates as soon as this year.
Following the Fed’s decision on Wednesday, the fell 1% to 101.08 points, its lowest level since April 2022. traded at 100.957 points, even lower.
The central bank noted recent progress toward lowering inflation (bps). But Fed Chair Jerome Powell also said that the country’s inflation rate was still high and that he wasn’t sure how much higher the bank would have to raise rates to ease price pressures.
Markets, on the other hand, seemed to have taken this as a sign that the Fed was close to reaching its maximum interest rate during this hike cycle, and expectations for a possible dovish pivot by the Fed in the second half of the year were also growing.
Markets anticipate that the Federal Reserve will then announce a hold on further rate hikes, despite the fact that the central bank is still expected to raise rates by.
In a note, analysts at ING stated, “With the economy losing momentum, the jobs market showing tentative signs of cooling, and inflation on a downward path, we expect one final 25 bps hike in March.”
Additionally, ING pointed out that the Fed funds rate had finally surpassed a “key metric” that the central bank had intended to achieve. The investment bank now anticipates that inflation will decrease more quickly in the coming months. In December, the U.S. core PCE price index was 4.4%, while the Fed’s target rate is now 4.75 percent.
According to Bloomberg, traders in the interest rate swaps market seem to be pricing in the possibility of in the second half of the year.
ING stated, “Recessionary forces will then make the case for rate cuts later in the year,” noting that by the second half of 2023, economic growth, corporate funding, and the job market are likely to slow even further.
The dollar was affected by the possibility of a dovish pivot. However, the strength of and in anticipation of hawkish central bank meetings in the two nations also put pressure on the greenback.
Both the and the are supposed to raise financing costs by 50 bps later on Thursday, and are additionally expected to flag more climbs.
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