Dollar Continues to Dominate, Stocks Sink

The interruption of supply and the impact of Russia’s conflict in Ukraine on oil and food prices continue to hinder development and drive central banks to tighten monetary policy aggressively in order to control inflation, according to a report released by HSBC on Friday.

In the UK, the newly appointed finance minister Kwasi Kwarteng will provide a so-called “mini-Budget,” his first fiscal report to parliament. In addition, he is scheduled to give further information about how he intends to help the nation’s economy during what is anticipated to be a challenging winter.

Meanwhile, the Bank of England pulled the trigger by 50 basis points, disappointing investors somehow. However, Governor Andrew Bailey stated that despite the possibility of a more severe economic downturn, they would continue to respond “forcefully, as required” to inflation.

BoJ intervenes in FX market

After hitting a 24-year low against the dollar, the yen rose 0.2% to 142.09 on news that Japanese officials had purchased yen on the open market to support the weakening currency.

The BoJ kept its ultra-loose monetary policy despite economic pressure from increasing inflation and declining GDP. The intervention helped the yen rebound from the twin whammy of a hawkish Fed.

Nevertheless, the outlook for the yen remains bleak.  The BoJ is currently the only major central bank in the world to maintain negative interest rates, which puts it at odds with rising global lending rates. This has significantly weakened the Japanese economy and put pressure on the yen this year.

Later today, Federal Reserve Chair Jerome Powell is due to deliver opening remarks at a Fed Listens event, in Washington DC, likely causing volatility in the markets again.