Dollar Rallies After Hawkish Powell
The US dollar and treasury yields climbed higher after Jerome Powell’s second testimony of the week indicated that there are more interest rate hikes to come from the Federal Reserve. The dollar index rose 0.4% and the benchmark 10-year treasury yield jumped 7.6 bps to trade up to 3.798%. US stock indices had a better day with the Dow finishing close to flat and the S&P and Nasdaq rising, 0.37% and 0.95% respectively. Across the pond earlier in the day the Bank of England surprised markets by adding 0.5% to its Official Bank Rate and the Swiss National Bank raised by 25bps, the GBP and the CHF consequently losing the least ground against the dollar on the day.
Markets to Remain Volatile
Investors are expecting markets to remain volatile over the next couple of months as we move into the Northern Hemisphere summer trading period. Traders normally anticipate a bit of a drop in volatility during the months of July and August as the major financial centres in Europe and the US move into summer holiday territory, but many are expecting things to be a lot different this year. Some investors feel that global markets are poised for some big moves as central banks continue to battle the twin threats of inflation and recession. Markets have remained buoyant over the last few months despite central banks continuing to raise rates and fears that there could be some hard landings ahead are increasing in certain sectors. We have seen higher―than―expected rate moves from the Bank of Canada, the Reserve Bank of Australia and last night the Bank of England in the last month and some feel that if the Fed follows suit, US markets could take a big hit and drag the rest of the global economy with them.
PMI Data Deluge Ahead
It looks set to be another busy end to the week for traders today as a plague of PMI numbers is set to hit the screens later in the day. Investors are anticipating a more subdued Asian session again with Chinese markets enjoying a long weekend, but we are expecting to see moves off the back of data releases in both the European and US sessions. Both Manufacturing and Services PMI numbers are due out from France, Germany and the UK in the European session and the theme continues into New York Day with the Services number expected to be higher than Manufacturing once again.
