(Finance) – The super dollar resumes its run and crushes the euro and the pound to new lows multi-year. It is the effect of different policies and timing of central bankswhich after years of zero interest rates, have decisively reversed the course, united against a common enemy: inflation.
Pound also hole 1.13 threshold
After attempting a rally to USD 1.1360, the pound climbed higher in the afternoon new lows of $ 1.1266, with a downward spin that in recent days has led it first to break through the threshold of 1.14 and then also 1.13 USD. The announcement of a Bank of England interest rate hike by 50 basis pointswhich reduced inflation forecasts, forecasting a lower-than-expected peak.
For the analysts of BlueBay Asset Management “the principal members of the Monetary Policy Committee, including Bailey, have opted for a calmer and more measured approach” and “the risk main of this strategy is that the BoE is not doing enough at this moment, with repercussions especially on the exchange channel: if the pound were to fall further, pressure would increase for the British central bank to take a bigger step in November “.
UK rates, now at 2.25%, they are still distant from 3-3.25% achieved by US rates. The meeting of the BOE in fact follows the most fruitful monetary policy meeting of the Fedwho announced a new one last night increase of 75 basis points, bringing the Fed Funds to a range of 3-3.25% and revising the estimates of growth, inflation and dot plots. The road to bring down inflation – President Jerome Powell has hinted – is still long and the central bank will not stop until it has completely subjected inflation.
Euro at twenty-year lows and below par
And now we come toEUR which collapsed again below par against the dollar, positioning itself at 0.9848 USD at the lows of the last twenty years. The single currency in the morning touched a low of 0.9809 USD, the lowest level since December 2002. Unlike the greenback and the British pound, the European currency is also suffering from the effects of the war in Ukraine, sanctions imposed on Russia and the Moscow counter-offensive on gas, which caused an unprecedented energy crisis.
The ECB plans to do more
Plus, it historical pragmatism of the ECB has expanded it interest rate spreads between the United States and Europe, to the detriment of the single currency, which still gives way to the dollar. At the last monetary policy meeting, the ECB decided to raise interest rates by 75 basis points to 1.25%after accumulating a certain lagging behind the BoE and the Fed. The economic bulletin published this morning confirms that the ECB expects to further increase interest rates in upcoming meetings, to curb demand and protect against the risk of a persistent increase in inflation expectations “.
Meanwhile, the member of the Board Isabel Schnabelin an interview with the newspaper “t-online”, launched a warning to governments Europeans, indicating that rain support measuresat this stage, “they can stimulate demand and push inflation up” and the ECB would therefore be forced to “raise interest rates even higher“than expected.
But the forecasts are too optimistic …
“We do not think that the ECB will maintain the decidedly hawkish attitude expressed during the meeting last Thursday,” said Gerro Jung, Chief Economist of Mirabaud AM, indicating that the Eurotower, contrary to what was stated by President Lagarde, it will take “a break” after another rate hike in October, “as the economic situation in the fourth quarter will have deteriorated significantly”. “In our opinion, the forecasts of the European Central Bank they are optimistic – says the analyst – because they exclude a recession “.
Bank of Japan immobility
There Bank of Japanfinally, the more cautious among central banks, little used to inflation, more prepared for a deflationary framework. At the end of the monetary policy meeting, you maintained an accommodative monetary policy and have not yet decided to raise interest rates, rather he preferred to intervene in defense of the yen, which continues to depreciate and has already lost 20% of its value. A move that was deemed useless in the face of the policies of other central banks and which will also force Japanese bankers to change course,