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On August 30th, Finnish President Alexander Stubb stated on Saturday that he does not believe Russia will attack NATO, "the worlds most powerful military alliance." However, in an interview with the German newspaper Bild, he said NATO should "prepare for the worst to prevent it from happening." Stubb pointed out that Russia has lost more soldiers than it recruited and judged that Russia may mobilize more troops in the fall, although this move would have "domestic political implications." He said Moscow is in an "increasingly complex situation," but emphasized that Russia will not end the conflict due to an economic downturn. He stated, "Never underestimate how much economic hardship the Russians can withstand."On August 30th, Yonhap News Agency reported that US President Trumps financial disclosures revealed he traded shares of e-commerce giant Coupang Inc. twice in June through a fund manager. Meanwhile, tensions between the US and South Korea continue to escalate over South Koreas regulatory handling of the massive data breach at the US-listed e-commerce giant. In July, the US House Judiciary Committee released a temporary staff report accusing the South Korean government of carrying out a "discriminatory attack" against Coupang and all other US companies, stating that Coupang has been a "consistently targeted entity."On August 30, Iraqi Prime Ministers Security Advisor Qassem Araji stated in a recent interview with Al Jazeera that Iraq maintains "good relations" with both Iran and the United States and seeks to act as a "bridge" for communication among all parties to reach an agreement that safeguards the interests of the entire region. He added that Iran has emphasized the necessity of eliminating extremist groups within Iraq.On August 30th, SK Hynix CEO Guo Luzheng stated that the company remains open to further investment in the US semiconductor industry, while predicting that the global memory chip shortage will continue until the end of 2030. "We are always open to more investment, but no decisions have been made yet," Guo Luzheng said. He stated that SK Hynix is searching globally for potential sites that can meet its R&D and testing needs, noting that electricity, water resources, and government incentives are key considerations. Guo Luzheng said, "We are open to any location that can provide sufficient infrastructure and resources." He also expressed hope that the company will bring "more good news" to the US artificial intelligence industry in the future.Iraqi Prime Ministers Security Advisor Qassem Araj: Iraq seeks to become a "bridge" between Iran and the United States.

As Fed Hawks Push The Market, The US Dollar Index (DXY) Rises To A Six-Week High Over 104.00

Daniel Rogers

Feb 17, 2023 14:29

 US Dollar Index.png

 

The US Dollar Index (DXY) posts slight gains near 104.15 in early Friday trading as bulls flirt with the six-week high. Nonetheless, the hawkish Federal Reserve (Fed) statement and favorable US statistics, as well as US-China tensions, could be viewed as having played key roles in illustrating the DXY's three-day gain.

 

Wednesday drew major attention to the US Producer Price Index (PPI) for January, as its 0.7% MoM increase was the biggest since June. The improvement in US Initial Jobless Claims for the week ending February 10, which came in at 194K compared to 200K expected and 195K prior, was very positive. In contrast, the fall in Housing Starts in January and the Philadelphia Fed Manufacturing Survey in February appear to have received attention.

 

Following the release of the data, James Bullard of the Federal Reserve Bank of St. Louis and Loretta Mester of the Federal Reserve Bank of Cleveland expressed their hawkish inclination and supported the dollar. Bullard of the Federal Reserve noted, "Continued policy rate rises can help lock in a disinflationary trend in 2023, even with steady growth and robust labor markets, by maintaining low inflation expectations." In a similar spirit, Fed's Mester stated that the Fed will need to rise beyond 5% and maintain that level for some time. The policymaker stated that she cannot predict if the Fed would demand a greater rate hike at the next policy meeting, but she does not intend to surprise the markets.

 

Notably, the most recent FEDWATCH data from Reuters says that interest rate futures imply US interest rates could peak near 5.25 percent in July before declining to 5 percent by year's end. The same signals a greater policy reversal than the Fed's peak of 5.10% in December, which in turn suggests a few more rate hikes from the Fed and supports US Dollar bulls.

 

On a separate page, the fresh US-China tensions and Russia's determination to back down when it comes to attacking Ukraine weigh further on risk appetite and the EUR/USD exchange rate as demand for the US Dollar rises. During an interview with NBC News, Vice President of the United States Joseph Biden launched shots at his Chinese counterpart and expressed his hopes for a chat with the Chinese leader. According to Reuters, US President Biden added, "I don't believe Xi intends to fundamentally sever ties with the United States and with me."

 

Wall Street ended with a loss, while S&P 500 Futures were down 0.30 percent intraday at the time of publication. The yields on 2-year US Treasury notes increased to their highest levels since November 2022, completing the day at 4.64 percent. The yields on 10-year US Treasury bonds reached their highest levels in 2023 with the most recent reading of 3.86 percent.

 

A light calendar on Friday should give the DXY bulls the upper hand ahead of next week's Monetary Policy Meeting Minutes for the Federal Open Market Committee's (FOMC) most recent activity, given the added fire to the hawkish Federal Reserve worries, supported by solid US data.


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