Dollar rallies/gold falls on back of Fed’s ‘happy’ hike
The dollar surged this morning on the back of only the second Fed rate rise since the 2008 financial crisis.
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The dollar surged this morning on the back of only the second Fed rate rise since the 2008 financial crisis.
In backing off from even a minuscule rate rise at its September meeting, the Federal Reserve is running the risk of appearing to be a follower rather than a leader.
The Federal Reserve’s decision announced last night to keep rates on hold has left investors waiting to see the outcome and market impact of the Presidential election before a rate rise is put back on the agenda.
Super Thursday has come and gone, but Wednesday could shape up to be somewhat of a ‘Wild Wednesday’ on financial markets, should the plethora of central bank announcements on the day not go according to plan.
The European Central Bank decided to stick rather than twist today as it announced the deposit rate has been held at -0.4%, the refinancing rate held at zero, and the details of its €80bn per month quantitative easing programme are unchanged.
Not only do zero or negative interest rates fail to provide an “easing cushion” in a recession, but they destroy capitalism’s business models, according to Bill Gross of Janus Capital.
Almost two thirds of German savers believe they could soon face negative interest rates on their bank accounts, according to a poll administered by Union Investment.
Speaking at the annual Jackson Hole symposium, Federal Reserve Chair Janet Yellen said the solid performance of the United States labour market and current economic outlook mean the case for an increase in the federal funds rate has ‘strengthened in recent months.’
The Federal Reserve’s decision to hold rates at 0.25-0.5% announced last night surprised nobody, but the accompanying rhetoric suggested a more hawkish stance is emerging.
Record-low interest rates are the number-one risk to investors, even if they stay at their current levels, said Greg Woodard, who is part of the management team of the GAM Star Global Quality Fund.
The amount of global sovereign fixed income with negative interest rates is up 5% since the end of April, according to Fitch Ratings.
Negative interest rate policies have started to unnerve investors, even though Sweden, Denmark, the eurozone and Switzerland have all had negative policy rates for over a year.