Marketmind: Unstoppable Dollar

Marketmind: Unstoppable Dollar

A look at the next day in European and global markets from Anshuman Daga

The controversy over the interest rate increase can be discerned.

Two European Central Bank policymakers have given differing views on the size of a future rate hike, noting some disagreement over whether the unprecedented 75 basis point rise last week should be repeated.

Investors’ concern about the risks of slowing growth is obvious.

The German bond yield curve inverted briefly on Thursday, while German bond yields rose to an 11-year high of 1.539%.

But there appears to be little stopping the strong dollar, which is already up 15% against a basket of currencies this year. Fed fund futures now point to a 25% chance of a 100 basis point hike at next week’s meeting.

This gives support to dollar bulls, who have already hit the euro and yen to their lowest levels in two decades and the pound to their weakest levels in nearly 40 years.

Overnight, the World Bank came out with grim news.

He warned that the world may be headed for a global recession as central banks around the world raise prices simultaneously to combat persistent inflation.

While the Fed meeting will be the biggest event for financial markets next week, the regional focus will also be on the expected increases by the Bank of England and the Bank of Japan as well.

On Friday, Asian stocks fell on downbeat economic assessments, despite data showing surprising resilience in the Chinese economy as factory production grew faster than expected and retail sales grew the fastest in six months.

Investors appear to be more concerned about a deepening housing slump in the world’s second largest economy.

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Meanwhile, the countdown to what could be one of the world’s largest initial public offerings has begun. Sources said that the supervisory board of Volkswagen (ETR:) will meet on Sunday to proceed with the IPO of its Porsche brand.

Dollar grows higher

Key developments that may affect the markets on Friday:

Economic data: Eurozone final CPI for August

Speakers at the events: European Central Bank President Christine Lagarde and Bank of France Governor Franรงois Villeroy de Gallo; European Central Bank chief economist Philip Lane

University of Michigan index

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