The central bank’s quarterly projections see US GDP growth slowing to 0.2% this year before recovering to 1.2% expansion in 2023, well below output potential.
Meanwhile, Fed rate cuts are not expected until 2024.
In that framework, The dollar index reached a new 20-year high of 111.63 units, when compared to a basket of peer currencies, and added 1.1% to 111.42 units in the afternoon.
On the other hand, Putin called on Wednesday to 300,000 reservists to fight in Ukraine and said Moscow would respond with the full force of its vast arsenal if the West continued what it called its “nuclear blackmail” over the conflict there. In recent weeks, Ukraine had recovered more than 3,000 square kilometers. The decision includes only citizens who are in the reserves or have military experience.
The European currencies were the most affected by sales in foreign exchange markets, as Putin’s comments exacerbated concerns about the economic outlook for a region that has already been hit hard by Russian restrictions on gas supplies and faces expectations of rising oil prices. rates in the United States and the possible cooling of activity for the third quarter projected by different international organizations and private companies. On this last case, black rock warned that the rise in rates is going to have an impact on activity and asked that the damage they generate be taken into account, while FedEx saw its shares collapse after projecting lower demand due to inflation.
In the meantime, The euro, the largest component in the dollar index, fell to a 20-year low, hitting $0.9810. The European single currency was trading at $0.9837, down 1.3% on the day.
Against the yen, the dollar posted smaller gains against other currencies, adding 0.5% to 144.41 yen. Traders were wary of taking the dollar higher given the possibility of Bank of Japan intervention to support the yen.
“They (the Fed) have a short window to act aggressively and they seem eager to take advantage of it,” said Jan Szilagyi, co-founder and CEO of Toggle AI, an investment consultancy.
“There is another reason to expect more hikes: people’s and market’s tolerance for tighter monetary policy is much higher with the unemployment rate below 4%, a record low,” he said.
Source: Ambito
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