Whither the dollar?By Arnaud Masset
Investors don’t yet know where higher borrowing rates will send the dollar. They could slow economic growth by making corporate/consumer debt more expensive and putting government even more in the red. On the other hand, they could improve returns on invested dollars. Until investors decide, the greenback will trade in its current range against most of its peers.
Yesterday the USD rose across the board, as the US Federal Reserve’s new Chair, Jerome Powell, boosted his outlook for the economy and suggested the Fed will hike rates four times in 2018, rather than the three times expected by markets. The dollar index broke the 90.0 resistance level and stabilised around 90.45 amid a sharp drop in EUR/USD and a continued rally in USD/CHF. The single currency fell 1% to $1.2220, while the dollar rose to 0.9415 against the Swiss franc. Powell’s comments tanked stocks: the S&P 500 slid 1.27% to 2,744 and the Dow Jones closed at 25,410, down 1.16%. US Treasury yields spiked, with the 10-year yield hitting 2.92% and the 2-year yield reaching a 9-year high at 2.28%.
European markets exhaleBy Vincent-Frédéric Mivelaz
February consumer confidence in the euro zone decreased 0.10, falling from January’s 17-year high at 1.40, while German and Spanish inflation figures showed signs of growth, and uncertainties continue about euro reforms, Italian elections and Germany’s Grand Coalition (nicknamed GroKo).
European Euro Stoxx 50 closed at 3’458 (-0.15%), hampered by Real Estate (-1.55%), Materials (-1.35%), Consumer Staples (-1.25%) and Telcos (-0.97%) while supporters were IT (+0.61%) and Financials (+0.56%). National markets followed: 7’282 (-0.10%) for the FTSE 100, 12’491 (-0.29%) for the DAX, 5’344 (-0.01%) for the CAC 40, 22’724 (+0.08%) for the FTSE MIB and 9’900 (-0.02%) for the IBEX 35. EUR/USD slightly declined, trading at 1.2234 (-0.67%) following the hawkish speech by US Federal Reserve Chair Jerome Powell to Congress. European Bond yields gained, as the 30-year, 10-year and 2-year are estimated at 1.319 (+1.53%), 0.680 (+4.23%) and -0.521 (+3.08%).