Federal Reserve Chair Jerome Powell’s indications for more interest rate hikes for longer at his Jackson Hole Symposium speech pushed the US dollar to highs last seen two decades ago. The comments sent tidal waves across global markets as they caused global stock markets and equity futures to drop, they lifted two-year Treasury yields to levels last seen 15 years ago, putting pressure on major currencies, and driving the price of gold lower.
Powell indicated in his Jackson Hole speech that the Fed will likely keep tightening its monetary policy for some time to fight soaring inflation and warned of the risks of changing their course too soon. He also pointed out the potential economic pain the measure could cause for households and businesses.
Investors are now expecting the Fed to raise interest rates by 75 basis points at their next meeting in September.
US Yield Curve Inversion Points to Possible Recession
There has been a sell-off in US bonds and the US Treasury yield curve experienced a deepened inversion with the two-year Treasury yield climbing to its highest point since 2007. This signals a possible recession as the Fed tightens its monetary policy.
US dollar at 20-year high
The currency of the largest economy extended its Friday rise and surged to a two-decade high against a basket of currencies today, Monday, in the Asia trade. The strengthening dollar is pushing other key currencies to fresh lows and is putting pressure on emerging markets.
Euro Still Struggles
The Euro continues to struggle after falling below parity against the US dollar last week. Despite the possibility of the European Central Bank raising interest rates by 75 basis points in their September policy meeting, the Euro hasn’t recovered as investors remain more focused on the energy crisis that’s troubling the bloc.
Global Stock Markets in the Red
Shares in the Asia Pacific traded lower today, Monday, after Jerome Powell’s Jackson Hole statement that higher interest rates will likely persist. Nasdaq 100 futures recorded losses while progress in the US-China delisting conflict offered support to Chinese stocks.
Oil Prices on the Rise Again
Oil prices surged on Monday. The prices rose over the possibility that OPEC could cut output to support prices. Also, a conflict in Libya sparked worries about a possible crude supply disruption from the nation at the same time that demand is rising and natural gas prices in Europe are climbing higher.
Gold Price Drops after Powell’s speech
The price of the precious metal fell for the second consecutive day to its lowest level in one month and is headed towards a five-month drop. The shiny metal lost its allure after Fed Chair Jerome Powell said that the Fed will probably keep raising interest rates to curb inflation.
What to Watch out for this Week:
US consumer confidence
New York Fed President’s speech
ECB Governing Council members’ speeches
Nord Stream pipeline gas flow to be cut for 3-day maintenance
Cleveland Fed President’s speech
China Caixin manufacturing PMI
US Private Nonfarm Payroll (NFP)
UK leadership election ballot closes