The rising optimism over the Federal Reserve breaking the tradition of central bank caution by raising US interest rates in 2016 has inspired the Dollar bulls with the Dollar Index edging higher towards 96.00.
After all of the alleged "clarification" from Fed Chair Janet Yellen’s somewhat more hawkish views that were reinforced by Fed Vice-Chair Stanley Fischer’s missives at this year’s annual KC Fed Jackson Hole Policy Symposium, equities and govvies rallied back together Monday from Friday’s mutual selloff. How could this be? Surely the Fed might now raise rates as early as the September (major projections revision and press conference) FOMC meeting!
Some of the mainland European stock indices eked out small gains last week despite the falls in United States, UK and Japanese stock markets. However, at the start of this new week, global equities have rebounded across the board while the dollar has extended its gains further against a basket of foreign currencies.
Sentiment toward the U.S. economy was elevated on Friday following the hawkish comments from Fed Chair Janet Yellen, which bolstered expectations over the Federal Reserve raising U.S. rates in 2016. Investors were gifted the clarity long sought when Yellen suggested that the case for raising U.S. rates had strengthened in recent months consequently uplifting the U.S. Dollar.