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US dollar remains strong


16 June 2022

On Thursday, the major is very cautious. The quote is 1.0443. News is plenty today, and all about global regulators. For example, the Federal Reserve system increased the interest rate by 75 base points to 1.50-1.75%. This is the most devisive action taken by the Fed since 1994. The expectations were more or less like that: after the inflation statistics for May were published, it was doubtful that the Fed will hold its monetary aggression back.

In the comment, it is said that after a decline at the beginning of the year the US economy expanded with a foothold in the growing payrolls and low unemployment. Meanwhile, inflation remains high due to the imbalance of supply and demand. Inflation risks remain under attention of the regulator that considers valid increasing the target range.

Quite interestingly, the Fed returned to voicing an inflational goal of 2.0%. Interest rate forecast for 2022 was expanded to 3.4% from 1.9%. Jerome Powell did manage to calm down investors explaining that this increase in the rate was unnaturally big and would not come into practice.

The head of the ECB Christine Lagarde on Wednesday spoke about the necessity to be strong and consistent in the monetary policy and noted that crises are never the same. Apart from this, the ECB announced flexible reinvesting by PEPP in order to keep functioning the mechnisms of passing over monetary policy.

In other words, the Fed is ready to attack inflation, while the ECB is still waiting for a miracle. That is why the US dollar us growing while the euro remains depressed.

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