(Ipek Ozkardeskaya – Swissquote Bank Ltd)
Yesterday, the Bank of Canada (BoC) raised its policy rate by 75bp at yesterday’s meeting as expected.
Today, the European Central Bank (ECB) will decide by how much they will be raising their policy rates. There are two camps: The 75bp-hike camp believes that the ECB should hike the rates relatively faster to tame the surging inflation in the EZ. The 50bp-hike camp argues that a 75bp hike is too much for an economy that faces a terrible recession – amid the worsening energy crisis.
With the stronger US dollar, you would expect the US exports to slow. But the contrary is happening. The US trade deficit fell to $70.7 billion in July, from $80.9 billion in June and an all-time high of $106.9 billion revealed in March.
White House said that the fact that ‘real goods exports reached record levels is an encouraging sign of the resilience of the American economy’. US equities had a strong rebound yesterday. The S&P500 advanced 1.83%, while Nasdaq jumped 2%. Apple gained a bit less than 1% as it revealed the new iPhone.
But the latest words from the Federal Reserve (Fed) members weren’t softish, at all. The Fed’s Vice Chair Lael Bainard repeated that the rates will be hiked to restrictive levels, Loretta Mester said that the US benchmark rate will go above 4% in the early 2023, and the Fed Chair Powell is due to speak today as well, and he will also repeat that there will be no easing to be anticipated just yet. So, gains remain vulnerable to sudden change in risk appetite.
Elsewhere, gold bounced back above the $1700 mark, Bitcoin hit $18500 and the US crude dived near 6% to $81.50 a barrel, as the global recession fears outweighed the supply side concerns.