In a recent update to the Federal Reserve Board of Governors, they removed their reference to interest rate hikes “removing any doubt that the US central bank would raise rates in response.” The announcement sent global markets into panic mode and Euro Forex market strengthened as European traders took advantage of higher US borrowing costs.
The “boe’s hawkish turn reignites the pound’s pre pandemic strength” is a headline from The Telegraph that speaks of the euro forex market strengthening as the Fed turns hawkish.
- On the back of Powell’s turnaround, the dollar has stabilized.
- Yields fall once again as Omicron dominates the news.
- Markets on Wall Street have had a rollercoaster week.
The FX market is in rather good shape as we approach the middle of the week. This is primarily due to remarks made by Federal Reserve Chairman Jerome Powell on Tuesday. Even while the newest COVID-19 variation takes up the news, these signals a more hawkish posture from the Fed to address inflationary pressures. Markets have been shaken by Omicron, which has influenced the US Treasury Yield, which has dropped further in early trade. On Wall Street, it’s been an unpredictable week, with huge drops followed by rebounds the following day.
The Fed surprises with a shift in strategy.
Those involved in forex trading have become used to the Federal Reserve’s reassuring attitude during the epidemic. No one has been a more passionate proponent of this dovish approach than the Chief himself, Jerome Powell. Despite opposition from other officials, the belief that inflation was “transitory” was maintained.
According to Powell’s testimony to the US Senate Banking Committee yesterday, this word has officially been “retired.” Analysts believe the action has significantly boosted the probability of a Fed rate rise in the next six months. As a result, the US Dollar has fallen, allowing the Euro to trade over 1.135 at the time of writing.
The Virus Variant Continues to Cause Problems
The US 10-year treasury yield has dropped below 1.5 percent again ahead of crucial US data later in the day, including ISM Manufacturing PMIs. The treasury yield, like many other markets at forex brokers and elsewhere, has had a tumultuous week. The move downward also works to pull down the Dollar and any currency gains.
The Omicron variation is still the most important component in these motions. While the United States has resisted any more restrictions beyond banning travel from select African nations, the virus’s branch has been rapidly spreading throughout Europe. Cases have surfaced today in the United Kingdom and Ireland, with governments debating how to deal with this current wave.
On Wall Street, the Unpredictable Week Continues
On Wall Street, it’s also been a tumultuous week. When the news of Omicron initially broke, stock prices plummeted. Following that, a rebound to start the week was followed by yet another wide sell-off yesterday. The Dow Jones futures, along with the other major indexes, are looking quite bullish for Wednesday after losing more than 600 points in the previous session. The S&P 500 and the NASDAQ both had pre-market gains of about 1.5 percent.
What remains to be seen is how the Fed’s shift in strategy will affect the street. A more hawkish stance is the polar opposite of the support that historically aided the market during viral outbreaks. With the temporary inflation story no longer in play, stock traders may find themselves in a more difficult situation.
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The “Euro Forex Market Strengthens as Fed Turns Hawkish” is a news article that discusses the Euro Forex market. The article says that the Euro Forex market has strengthened after the Federal Reserve turned hawkish. Reference: forex vs stocks.
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