FX Talk - an Ebury podcast

S3E10: How is the Federal Reserve policy affecting the foreign exchange market?

May 11, 2022 Ebury FX Talk Season 3 Episode 10
FX Talk - an Ebury podcast
S3E10: How is the Federal Reserve policy affecting the foreign exchange market?
Show Notes

We spoke on our last episode about the sharp sell-off witnessed in risk assets in late-April, which sent most higher risk currencies lower against the safe-havens, notably the US dollar. The US dollar index, which measures the currency against a weighted basket of its peers, rose to its strongest position in almost 20 years earlier in the week, as heightened global growth concerns triggered a ‘risk off’ mode in markets. 

The dollar has also continued to be well supported by expectations for higher US interest rates. At its FOMC meeting last week, the Federal Reserve raised rates by 50 basis points, as expected, the largest such move in more than two decades. The communications from chair Powell were again hawkish. He called the US labour market ‘very, very strong’, while once again saying that inflation remained ‘unacceptably high’.