Easing Recession Fears Push the Dollar Up

On Friday morning in Asia, the dollar rose, albeit movements were modest as some recession worries subsided in response to upbeat remarks from U.S. Federal Reserve governors.

The U.S. Dollar Index measures the value of the dollar against a basket of other currencies. By 12:55 AM ET, it had risen 0.01 percent to 107.14. (0455 GMT). To reach 135.54, the USD/JPY pair lost 0.32 percent. Shinzo Abe, a former Japanese prime minister, was shot on Friday while running for office in Nara. The AUD/USD pair slowed to 0.6823, down 0.21 percent, while the NZD/USD pair fell to 0.6171, down 0.06 percent. The GBP/USD pair dipped 0.06 percent to 1.2014, while the USD/CNY pair edged up 0.07 percent to 6.7059.

Is Recession Coming Our Way?

On Thursday, St. Louis Fed President James Bullard and Fed Governor Christopher Waller reaffirmed the need for restrictive policy to lower skyrocketing prices while expressing optimism that the United States may still avoid a recession. Waller predicted that the Fed will raise interest rates by 75 basis points in July and 50 basis points in September to combat inflation. U.S. President will talk about U.S. tariffs on Chinese imports in a meeting with advisers later in the day. This should boost market optimism.

Initial applications for unemployment benefits in the US increased to 235,000 last week, indicating a slowing in the demand for work as the US Federal Reserve tightens monetary policy. Robert Carnell and Iris Pang from ING stated in a client note that it is “debatable” how the market would respond to departures from this forecast.

You might contend that a higher number indicates the Fed has more work to do, which increases the likelihood of a rougher landing. However, there are situations when market responses are less complex than you may think.