Once again, the actions of Russia are felt all around the world, starting from big changes in global stock markets. The Dollar comes out on top, experiencing its highest rate since 2002.
After today’s apocalyptic speech by Russian president Vladimir Putin, global markets did what global markets do: they broke new records of ups and downs. As 300.000 new conscripts were drafted for the war in Ukraine, the US Dollar experienced its highest rate since 2002, going up by at least 0.5%.
At the same time, European rates broke records in the opposite directions. London fell to its lowest in 37 years even before Putin started speaking, going down 0.4%. The Euro, on the other hand, was quite tired of breaking awful records and fell to $0.9885, only the lowest it has been in two weeks.
What this shows is that the Dollar, despite any attempt in the opposite direction by China, is still the main pillar of the global economy. In times of crisis, many rush to invest into the safest possible currency, which is the one dealt in Wall Street.
“So the Dollar was already looking quite punchy and clearly just the proximity to Ukraine of countries in Europe does make people consider what the situation might look like if the war in Ukraine becomes something bigger”, said financial analyst at AJ Bell in London Danni Hewson. And things might be looking even worse for European currencies, since Putin’s speech came ahead of a major decision by the Federal Reserve.
Another possible rise in interest rates
This rise in the Dollar value comes right ahead of a decision from the US Federal Reserve. It is likely, according to several analysts, that the Fed will decide to raise the interest rate once again, probably by a measure of 0.75% (it would be the third consecutive time).
Of course, this is another attempt to manage the rampant inflation, which is the highest it has been in decades both in Europe and in the United States. Obviously, the Dollar has much more room of improvement given its unshaken importance (as demonstrated today) and its geographical distance from Ukraine.
The United States will likely not experience the gas crisis as much as it will in Europe, and many expect the Euro to fall even more behind the Dollar. “The dollar is rallying more aggressively against the euro than the pound given that the Bank of England on Thursday is expected to follow the Fed with a similarly hawkish rate increase. The interest rate differential allure of the dollar post the Fed is only likely to last one day against the pound if we see a similar hike from the Bank of England.” was the prediction of Victoria Scholar, head of investments at Interactive Investors.
