The exchange rate of the main currency pair EUR/USD seems to have fallen steadily over the past few days as a result, to end up below the level of USD 1.1600 per EUR. The strength of the dollar could also be seen through the prism of its index, which has reached its highest level in almost a year.
It seems that the USD's recent strengthening might be related to the expectations that the Federal Reserve will scale back its asset purchase program from November and begin raising interest rates next year.
Dollar exchange rate up
Rising bond yields may also have contributed to the strengthening of the US currency. According to the latest data, the US economy grew at a rate of 6.7 per cent in the second quarter, slightly above the earlier estimate of 6.6 per cent.
Meanwhile, there are further signs that China's economic recovery is slowing. Evergrande's troubles point to structural problems in the real estate sector, while the manufacturing sector remains under pressure due to delta variant outbreaks, higher material costs, production bottlenecks, and most recently, electricity rationing. All of this could also drive capital into the USD as a potential safe haven.
Oil bought at any price
WTI crude oil futures were trading around $75 a barrel on Friday. They were near a three-year high at $76.67 and on track for a sixth straight week of gains. This may be related to the fact that Beijing has ordered China's state-owned energy companies to secure supplies for the upcoming winter season at any cost.
U.S. light crude rose 9 percent in September, the most since June, as OPEC forecasts that demand will outstrip supply by 1.2 million barrels a day in October and by 0.9 million barrels in November.
Investors are now focused on next week's OPEC+ meeting, with markets expecting the major producers to maintain their pact to increase production by 400,000 barrels per day in November.
September worst month on Wall Street since March 2020
On the last trading day of the third quarter, the Dow Jones fell more than 500 points, the S&P lost more than 1 percent and the Nasdaq lost 0.4 percent. Wall Street stock prices appear to have suffered from inflation and supply chain issues in September, with the S&P 500 falling more than 4 percent, the most since March 2020. Both the Dow Jones and Nasdaq recorded their worst month this year. The S&P and Nasdaq posted modest gains in the third quarter, while the Dow Jones posted a negative return.
On Thursday, both the Senate and House passed a supplemental appropriations bill that will keep the government running until Dec. 3.
Daniel Kostecki, Conotoxia Ltd.
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