The Federal Reserve (Fed) recently opted for a hawkish approach, skipping a rate hike this month, which resulted in the US dollar gaining value on a global scale
The Fed held the policy interest rate steady at 5.25%, signaling potential further credit tightening by indicating a rise in borrowing costs. Fed Chair Jerome Powell, providing insights on the state of the job market and a slowing inflation rate, managed to somewhat ease market uncertainty. Despite the reported consumer inflation of 4% in the US economy, the implemented interest rate hikes curbed the M2 money supply, slowing down the rate of price increases. The average hourly earnings data fell below expectations at 0.3%. Other data, such as the ISM Manufacturing Purchasing Managers Index, disappointed expectations with a figure of 46.9. The non-farm payroll data, which is closely watched by global markets and the Fed, was announced above both expectations and the previous level at 339K, generating positive signals for the country’s economy. While the slight increase in the unemployment rate was noted at 3.7%, it revived recession expectations for the end of 2023.
In the Eurozone, ongoing interest rate hikes have exacerbated inflation pressures, while the UK economy signaled growth
The European Central Bank (ECB) increased the policy interest rate to 4% with a 25 basis point hike. Consumer inflation in the region was announced at 6.1%, in line with expectations and showing a decline compared to the previous level. Retail sales data showed an increase at -2.6%, while the unemployment rate fell in line with expectations to 6.5%. In the UK, the Manufacturing Purchasing Managers Index was announced at 47.1, exceeding expectations but falling below the previous level. The UK economy showed a growth of 0.2% on a monthly basis and 0.5% on an annual basis.
In Asia, markets are grappling with mixed data, and China’s disappointing macroeconomic data has heightened concerns
China’s Caixin manufacturing purchasing managers’ index was announced at 50.9, exceeding expectations. However, a sharp drop in export data, previously at 8.5%, brought significant uncertainties. Despite the expectations for the export data to be at -0.4%, it showed a sharp contraction at -7.5%. Import data was announced above expectations at -4.8%. On the Chinese front, although the inflation data was slightly above the previous level, the increase was not as expected and reflected as 0.2% on screens.
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