The US dollar rally over the last few weeks quickly gave way to losses amid the Federal Reserve’s decision to raise interest rates by a quarter point while outlining plans to raise rates another two times before the calendar year ends. Although equities managed to react positively, slowing GDP growth and employment gains have seen the Fed take a less hawkish stance despite its intention to continue normalizing monetary policy. Nevertheless, with inflation still on the rise as evidenced by the latest PPI and CPI data, the Fed will have more room to raise rates if the trend stays intact.
Despite the Fed’s move, other global central banks refrained from adjusting policy. The Swiss National Bank and Bank of Japan opted to leave interest rates in negative territory. On the other hand, the Bank of England experienced some dissent after one member of the Monetary Policy Committee opted to vote in favor of raising interest rates. Aggregate Euro Area inflation experienced no major changes during the reading last week with headline inflation printing at 2.00% and core inflation matching the preliminary estimate of 0.90%. To cap off the week, Chinese industrial production and fixed asset investment gained ground whereas retail sales underwhelmed expectations by a wide margin.