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US Dollar remains close to 20-year high as Central Banks tighten policies

Most Asian shares dropped while Wall Street futures slightly rose today, Monday, as investors worry about tightening monetary policy pushing economies into recession. Chinese blue chips rose 0.5% as they were possibly boosted by news that President Joe Biden could be removing some tariffs on China.

Foreign Currency News

The Fed’s hawkish stance is keeping the US dollar close to its last week’s 20-year high. On the other side of the world, the euro showed no significant movement after French President Emmanuel Macron failed to regain control of the National Assembly, a development that could lead France into a political deadlock. The yen remained under pressure as the Bank of Japan has been insisting on its easy policy despite other central banks starting to tighten.

Inflation to recession?

Concerns that central banks’ aggressive tightening to contain rising inflation could push economies into recession continue to tower above the markets. This week, the sentiment is unlikely to change as the UK inflation figures are expected to be at alarmingly high levels, which could drive the Bank of England into rising inflation rates at a faster pace.

In the latest commentary from Fed officials, Governor Christopher Waller said that depending on data, he would be supportive of another 75-basis-point rate hike at the July meeting. At the same time, Bank of Cleveland Fed President stated that the risk of the US experiencing a recession is higher and it will take some years for the nation to hit its 2% inflation goal.

Trading Gold News

Gold rose on Monday morning in Asia as the US dollar was trading lower ahead of a US holiday. Gold has been trading in a tight sideways movement for at least a month because of the stronger dollar.

Oil Price News

The price of oil fell on Monday morning in Asia over supplies remaining tight and concerns that soaring energy prices could further contribute to a global recession which would eventually hurt demand. Oil fell 6% during the previous session.

Bitcoin hit by inflation

Bitcoin is trading at around $20,000 at the time of writing. Bitcoin and other cryptocurrencies are part of the wider range of assets that have been hit by central banks’ interest rate hikes aiming to curb high inflation.

What to watch out for this Week:

Reserve Bank of Australia (RBA) meeting minutes

Fed Chair Jerome Powell’s Senate testimony
Bank of Japan April policy meeting minutes

Gerome Powell’s testimony at US house
US initial jobless claims
Eurozone PMIs (France, Germany)
Australia PMIs
Economic Bulleting by ECB

US University of Michigan consumer sentiment