Market Response to Federal Reserve Policy
Currencies around the world held steady early in the week. People were waiting to see if the U.S. dollar would keep falling. This comes after the Federal Reserve seemed less strict than before. The dollar measure fell a little to 104.99. The euro was up a bit at $1.0738. Last week, the dollar fell over 1%, its most significant drop since mid-July, hitting a six-week low. Stocks worldwide did well, too, having their best week in a year. People think the Federal Reserve won’t raise interest rates anymore.
Other Economic Signs
Weak job numbers in the U.S., not-so-strong manufacturing globally, and lower interest rates for long-term U.S. government bonds also made the dollar more vulnerable. At the same time, the British pound, the Australian dollar, and the Japanese yen got stronger. A market analyst named Tina Teng mentioned that when there’s bad news, it is usually suitable for the markets. She thinks this could mean the Federal Reserve and other central banks might stop raising interest rates sooner.
Teng believes the dollar could stay weak throughout November.
A Cautious Note from Analysts
But, some analysts, like those at J.P. Morgan, say people should not get too excited about the weakening of the dollar. They think the reasons why the dollar was strong are less now, but they haven’t gone away completely. They might come back and make the dollar strong again. They also say that for the dollar to weaken, other places like Europe and China need to show they are doing better, which is not entirely certain.
Interest Rates and Predictions
Interest rates the government pays for borrowing money fell last week. This was after the job and manufacturing data weren’t significant, and the head of the Federal Reserve talked about ‘balanced’ risks. The interest rates for 2-year notes have dropped significantly in two weeks, while 10-year rates are near a five-week low. Betting markets now really think the Federal Reserve is done with raising rates. They also consider the Federal Reserve might lower rates as soon as June.
Global Central Bank Movements
People think the European Central Bank will lower rates by April, and the Bank of England will do so by August. The Japanese yen went down a little to 149.48 per dollar. Tina Teng thinks that with the dollar’s direction changing and the yen getting stronger from last week, Japan might not need to step in to help its currency.
The British pound is stable at $1.2373. There is essential information about Britain’s economy coming this week. Even though the pound went up last week, it lost about 6% in four months.
Gold and Cryptocurrency
The weaker dollar and interest rates have helped gold prices stay high, close to a five-month high. In cryptocurrencies, Bitcoin stayed at $34,847. The end of the Federal Reserve raising rates has helped it. People are also watching to see if new types of Bitcoin funds for investors will come out. No new funds have been approved yet, but several companies have asked to start them.
