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U.S DOLLAR DOMINATES

Harvest Global Markets :

Dollar Index reached a two decade high, hitting 109.48 earlier today. This record breaking news arrived after Federal Bank Chairman Jerome Powell opened the doors for another aggressive interest rate hike at Jackson Hole. He clearly warned that until there is evident eradication in inflation, interest rates are likely to remain elevated even if it brings serious economic contractions. After Jerome Powell’s speech, the market increased the probability of 75 basis points hike to 60%. Moreover, it is anticipated that the interest rates may hover around 3.8% by the mid of 2023.

Due to heated dollar, other major currencies witnessed a sharp slump. The Great Britain Pound dropped to a 2.5 year low of $1.1649, Japanese Yen dropped against dollar to $138.88 and Australian Dollar recorded a low of $0.6858 but pushed back a little later after the country’s retail sales increased more than expected. Preliminary data from the Australian Bureau of Statistics, released on Monday, showed that retail trade in Australia improved by 1.3% from the previous month i.e. surpassing the forecast of 0.3%. Furthermore, EUROUSD remained below parity at $0.9944. Euro portrayed some strengthening signs earlier this week after European Central Bank brought 75 basis points interest rate surge into the picture. However, the future of Euro may remain gloomy due to energy crisis.

Following a surge in dollar, the precious metal, gold’ prices also slumped to a one-month low today, with spot prices reached at $1726.06 per ounce and gold futures sank to $1732.30.

Going forward, data related to the tight U.S market will play a crucial role in determining the next monetary policy of U.S. Any positive labor data may increase the probability of another forceful inter-bank rate. Non-Farm Payroll data is scheduled on Friday, 2nd September at 1730 HRS PKT.

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