Market Reacts: Powell’s Higher Terminal Rate Projection Sends Dollar Soaring

Market Reacts: Powell’s Higher Terminal Rate Projection Sends Dollar Soaring

March 8, 2023 0 By Wiley McDermott

Yesterday the U.S. Dollar saw a decline in its price as its global price index plunged. But the market shifted today. But, on Tuesday Dollar continues to strengthen across multiple currencies.

The reason is that the dollar once more soared after the Feds chair Jerome Powell said that the United States Central Bank will increase the interest rate.

It is probable that the final level of interest rates will be greater than what was previously expected.

In addition to that, Powell stated that the Federal Reserve is ready to accelerate the frequency of raising interest rates if the data suggests that it is necessary.

The bank had reduced the speed of its tightening to 25 basis points during its two most recent meetings.

This stance was opposite to what the Feds did last year by massively spiking up the interest rate.

Powell is Openly Supporting Higher Interest Rate

Powell is openly addressing the possibility of setting a higher objective for interest rates.

It shows that the currency market can see the dollar is going further up and putting more pressure on other currencies. A strong dollar will also put extra pressure on the commodities market.

In another development, fed funds futures traders are betting about the fact that interest rates will be increased by 50 basis points during March 21-22, this accounts for an increase of 56%.

If the Fed decided to increase the interest rate by 25 basis points, this would account for an increase of 44%.

Investors will be actively observing the market developments for the next couple of weeks to make well-informed decisions. In case of any carelessness risky Forex transactions will welcome the traders.

Investors Should Also Expect Interest Rate Higher Than 0.75%

It is very much on the cards for the Feds to increase the interest rate higher than 50 basis points if needed.

Moreover, market experts are also saying that in September Feds can take the policy rate up to 5.57%.

It can be said that overall economic and market dynamics are highly favorable for U.S.D to grow further.

Talking of the global dollar index, it has seen an upbeat of 0.70%. By the end of today’s trading session, the dollar claimed the 104.97 mark.

Conversely, the Euro has seen a decline in terms of price by 0.64%. By the end of today, the Euro touched the $1.0615 mark. As compared to the greenback price against the JPY, the USD has seen a gain of 0.45%.

Similarly, the GBP plummeted by 0.95% to $1.1913, against the USD. The current price of sterling marks its all-time low price against USD since January the 6th.

Elsewhere, the Australian Dollar (AUD) also declined against the USD. The current dropped by $0.6605.

The current price of AUD shows that it has touched its all-time low price against the USD, since November 2022.

However, AUD had declined earlier following the Reserve Bank of Australia’s decision to increase its cash rate by 25 basis points.

But the bank officials have said that this was the last initiative they had taken to tighten up the country’s monetary policy to ensure economic growth.

This means no further strict regulations will be taken for the rest of 2023. This gives AUD the hope that once the economic bubble will settle the price of the currency will recover rampantly.

But the recent gain in the price of USD has delivered a killer blow to the commodities market.

The price of Gold, Crude Oil, Silver, Copper, and Natural Gas, all went down amid the news of the strong dollar.

As the things stand, things will certainly go bad from worse for commodity investors.

On the flip-side dollar, investors are enjoying steady gains. The dollar currently is heading in the right direction.

It is time for those investors who own dollars to hold on to their reserves to secure lucrative gains.