EUR/USD Impact – U.S. Stocks Drop With Resources as Rate Speculation Lifts Dollar

Good day forex traders.

In a twist of sentiments, it appears that the expectation of the US Federal Reserve interest rate hike is picking up again. We are looking at risk withdrawal as higher interest rates brings higher borrowing costs. On the other hand, it is likely to attract traders with the promise of a higher interest rate. Find below a market update by Bloomberg.

The Standard & Poor’s 500 Index headed for its first weekly decline in six, while European shares have fallen every day this week. Raw-materials producers led losses as the Bloomberg Commodity Index headed for its worst week in two months. Oil was poised for the first weekly decline since mid-February as data showed a bigger-than-expected increase in U.S. stockpiles. The dollar strengthened against all 16 major peers. Gold fell to a one-month low. After upsetting markets in August and again in early February, the prospect of higher U.S. interest rates is returning to the spotlight, as regional Federal Reserve presidents indicate support for higher rates as soon as economic data warrant. While the Fed’s recent halving of its projection for this year’s increases spurred stock gains and depressed the dollar, the more bullish tone from officials is now supporting a surge in the greenback that’s hurting the mostly dollar-denominated commodity market.

“It’s a clear situation that the Fed would like to move earlier rather than later just in order to get the policy rates away from the zero lower bound,” said Marius Daheim, a senior rates strategist at SEB AB in Frankfurt. “The Fed wants to see market consensus on its move before it does move. Past experience has shown that if the Fed sets itself against market sentiment, its actions and rhetoric can cause selloffs in risk assets.”

Traders are pricing in only […]

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