Investors bought the US dollar during the trading session on Tuesday, the 12th of October, less than 24 hours before the US inflation data and the release of the US Federal Reserve’s minutes of the previous meeting two weeks ago, in a sign that the inflation data will be positive today in September, pushing the US dollar to its highest level since September of the year The past 2020 recorded a new high for the year at 94.53, also benefiting from the rise in the yield on US 10-year Treasury bonds to the highest level in five months at 1.63 levels, before falling back at the end of the session.
Despite the declines this morning, Wednesday, and hours before the inflation data and the minutes of the US Federal Reserve, the markets are anticipating an increase in the consumer price index that measures inflation in September by 0.3% on a monthly basis or 5.3% on an annual basis, and that the main index, excluding food and energy prices, will rise to 0.3 % .
The supply chain crisis that puts pressure on American companies with the arrival of goods late or not arriving, in addition to the continuous rise in energy prices, which is causing the prices of goods and services to rise, supports the continuation of high inflation in September.
The US Federal Reserve will raise interest rates faster than expected. Investors will focus on the minutes of the US Federal Reserve at the end of the American session today, and the markets will monitor the extent to which the expectations of the members of the US Federal Reserve change for interest rates, especially since about half of the members at the last meeting expect to raise interest rates in the next year 2022.
We had followed the statements of Rafael Bostic, a member of the Open Market Committee and the President of the Federal Reserve in Atlanta, on Tuesday, in which he confirmed that he had no concerns about the recent employment data in September, which was weak, and that he would still prefer to start reducing the pace of bond purchases in November.
On the other hand, the International Monetary Fund reduced its forecast for global economic growth to 5.9% this year, compared to 65 in previous estimates, with the rise in supply chain concerns, to also reduce its forecast for the growth of the US economy by 1% to 6% this year, compared to 7% in estimates.
earlier in July. These expectations of the IMF slightly raised the markets’ fears that we will witness an inflationary stagnation, but until the moment, the signs confirm the continuation of the growth and recovery of the global economy, and the inflation problem remains the most prominent, as the US Federal Reserve sees that inflation next year may stabilize at 2.3% in their latest expectations, which is a level higher than 1.8 % that was in their expectations a year ago, and it will force the US Federal Reserve to raise interest rates early, according to the opinion of some analysts, but we are far from stagflation, which in order to happen we must witness a strong decline in global economic growth.
Strong data from US inflation, the euro, the yen and the franc will be among the biggest losers, and vice versa if the data is contrary to expectations and negative, it will support the rises of the commodity currencies (Australian, New Zealand and Canadian) in addition to the pound sterling.
The Japanese yen was one of the biggest affected by the gains of the US dollar and the rise in the yield on US bonds in the last two weeks to reach its lowest level since December of the year 2018 at 113.80 yesterday, Tuesday, before rising slightly and trading this morning at levels of 113.50.
The euro, in turn, recorded a new low for the current year against the US dollar at 1.1525 yesterday, Tuesday, affected by the decline in the economic confidence index in Germany and the euro zone, and it is now trading at 1.1545 levels with the opening of European markets.
06/11/2024
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