August 13, 2022

Another round of interest rate hikes on the way

LQDFXperts Features | Another round of interest rate hikes on the way

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Friday’s red-hot inflation reading – 8.6% –  prompted investors to raise their bets on aggressive Federal interest rate hikes. 

Global stock markets are falling sharply after hotter-than-expected May’s U.S. inflation print. Monetary policy tightening could tip the world’s largest economy into recession.

The stock-market selloff deepened Monday, with the benchmark S&P 500 confirming a bear market. Fears of a U.S. recession kicked all three U.S. major averages.

Wall Street has been on a downward spiral throughout 2022. Concerns about inflation and interest rates have been exacerbated by the war in Ukraine and China’s efforts to stamp out the coronavirus.

Goldman Sachs forecast a 75 basis-point interest rate hike after the Federal Reserve’s policy meeting on Wednesday, which would be the biggest since 1994. 

The coming week will be pivotal in the battle against soaring inflation for global central banks and markets.

Federal Reserve officials will meet on Tuesday and Wednesday to discuss their next monetary policy move.

The Bank of England’s Monetary Policy Committee will announce its latest interest rate decision on Thursday. Experts expect the central bank to hike by another 25 basis points to 1.25%.

Then there’s the BoJ on Friday announcing its monetary policy decision.

Investors will also be digesting a slew of economic activity data, including Chinese industrial production and retail sales, U.K. industrial production, employment and retail sales, and U.S. producer price inflation, retail sales and industrial production.

US Dollar soars amid the stock market sell-offs

Faced with rising chances of interest rate hikes by the Federal Reserve and other central banks, investors broadly unloaded risk.

While world stock markets are nursing deep losses, the dollar’s appeal as a safe-haven asset boosts its allure.

The greenback consolidated gains near a 20-year peak on Tuesday, surging against most global currencies. At the same time, its rivals, from the Aussie to the euro, nursed steep losses as traders braced for the US aggressive interest rate hikes.

Cryptocurrencies also experienced sharp declines too. Bitcoin fell 14% on Monday after Celsius Network froze withdrawals and transfers. The major U.S. cryptocurrency lending company cited “extreme” market conditions as the latest sign of the financial market downturn hitting the crypto sphere.

Crypto markets have dived in the past few weeks as rising interest rates and surging inflation prompted investors to ditch riskier assets across financial markets.

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*PLEASE NOTE The information above is not investment advice.