The Fed didn’t make changes for interest rates at its last meeting
At its most recent meeting, the Federal Reserve (Fed) opted to maintain the status quo, leaving interest rates unchanged at 5.5%. Jerome Powell, Chairman of the Federal Reserve, adopted a hawkish tone in the aftermath, paving the way for increased global demand for the dollar. He emphasized the Fed’s unwavering focus on price stability and full employment, reiterating the commitment to achieving a 2% inflation target. Powell didn’t rule out further rate hikes if necessary and noted the economy is growing more robustly than anticipated. The average hourly earnings data fell short of expectations at 0.2%, and the unemployment rate saw a slight uptick to 3.8%. The Institute for Supply Management (ISM) indices revealed a mixed picture, with manufacturing expanding and services contracting. Inflation continued its upward trajectory, reaching 3.7%.
Euro Zone in the spotlight amidst heavy data flow
Global markets turned their attention to the Eurozone, where the European Central Bank (ECB) under Christine Lagarde’s leadership, enacted a 25 basis point hike, setting the policy rate at 4.5%. Inflation in the region contracted to 5.2%, below both expectations and previous levels. Germany, the economic powerhouse of the region, posted inflation figures at 6.1%, in line with forecasts but below prior levels. The United Kingdom saw a 25 basis point reduction in interest rates, with the policy rate now at 5.25%. The UK’s inflation and unemployment figures were below and above expectations, respectively. Gross Domestic Product (GDP) data indicated a contraction at 0%, drawing significant attention. Switzerland, one of the most affluent countries in the region, adjusted the Libor rate to 1.75%, a 25 basis point decrease.
Asian Markets: Spotlight on USDJPY pair
The Bank of Japan held the policy interest rate steady at -0.1%. Japan’s GDP data for the 2nd quarter exceeded expectations at 1.2% on a quarterly basis. The USDJPY pair is testing the critical 148.40 resistance due to the dollar’s recent strength. The pair, last seen above these levels in the ’90s, continues to seek direction below this critical level. The Reserve Bank of Australia also maintained its policy rate at 4.10%. In China, the People’s Bank of China (PBOC) kept the minimum loan interest rate steady at 3.45%. China’s Consumer Price Index (CPI) data were in line with expectations but slightly above the previous level at 0.1%.
Domestic markets react to significant rate hike
The Central Bank of the Republic of Turkey (CBRT) implemented a substantial 500 basis point increase during its September meeting, raising the policy interest rate to 30%. Retail sales data exceeded previous levels at 31%. The improvement in industrial production continued at 7.4%. The unemployment rate showed promising decline, settling below the previous level at 9.4%. However, the inflation surge persisted in September, with data revealing a rate of 58.94%, above both expectations and previous levels. Manufacturing Purchasing Managers’ Index (PMI) data remained consistent with the previous level at 49.
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