Swift measures enacted by the Commission to expedite the execution of the proposed plans.
The Shift in Investment Landscape
Investors beware, the Euro, stocks, and riskier assets like cryptocurrencies are taking a hit, as inflation fears loom large. Timo Emden of Emden Research explains, "Investors are on high alert with inflation concerns, fearing swift interest rate hikes, particularly in the US." This apprehension could cause economic turbulence. James Bullard, head of the St. Louis Fed branch, hinted at a 0.75 percentage point increase in the US central bank's next meeting in September.
The DAX saw a plunge of 1.1%, dropping to 13,547 points, while the EuroStoxx50 fell by one percent. Cryptocurrency Bitcoin felt the heat with a dip of up to 8.6%, reaching a three-week low of $21,397.
The US Federal Reserve bumped up the key interest rate by 0.75 percentage points in July, followed by another increase in June. The interest rate now hovers between 2.25 and 2.50 percent. Many Fed officials predict the central bank needs to keep working to rein in inflation, Jane Foley of Rabobank in London pointed out. Under the shadow of speculation regarding further aggressive interest rate hikes in the US, the dollar index hit a four-week high of 107.9100 points.
THE EURO: WHERE'S THE MOVEMENT?
The Euro took a hit, slipping to a five-week low of 1.0053, creeping closer to parity. Surging German producer prices fueled fears of continued inflation. Prices rose by an average of 37.2 percent in July, fueled by escalating costs for energy and electricity. Despite inflation causing eurozone rates to rise, discussions about whether the European Central Bank will raise its key interest rate by 25 or 50 basis points in September highlight how behind the ECB is in comparison to the Fed. Esther Reichelt, a Commerzbank analyst, comments, "With the increasingly gloomy economic outlook, this is becoming a problem for the euro."
JUST EAT TAKEAWAY ON THE MOVE
In the corporate world, Just Eat Takeaway.com made a significant move. By selling its 33% stake in Brazilian company iFood to technology investor Prosus for 1.8 billion euros, the company's shares skyrocketed by almost 31% on the Amsterdam stock exchange. Prosus shares rose by 0.5%, while Just Eat competitor Delivery Hero gained 1.5% in the MDax. In the DAX, meal kit provider HelloFresh saw a 2% surge, but Deutsche Bank shares suffered the most, down by around 3%.
Commodity prices were weighed down by persistent economic concerns. North Sea oil Brent and US oil WTI both dipped by 1.6%, dropping to $95.05 and $89.01 per barrel respectively. The gold price slid due to a stronger dollar, reaching a three-week low of $1,749 per ounce. The dollar's strength makes commodities more expensive for investors outside the US.
In summary, aggressive interest rate hikes in the U.S. can have varying effects on currencies, stocks, and cryptocurrencies. While a stronger dollar and increased attractiveness of U.S. assets weakens the Euro, broader global economic conditions like trade uncertainty and geopolitical risks play a more significant role in influencing its value. Stocks and cryptocurrencies may suffer as borrowing becomes more expensive due to higher interest rates, causing investors to become more cautious. However, the focus has shifted towards potential rate cuts in some scenarios, which could provide a boost to stock markets and cryptocurrencies, increasing liquidity and reducing borrowing costs.
- Timo Emden, from Emden Research, explained that investors are on high alert due to inflation concerns, fearing swift interest rate hikes, particularly in the US, which could cause economic turbulence.
- Despite inflation causing eurozone rates to rise, discussions about whether the European Central Bank will raise its key interest rate by 25 or 50 basis points in September highlight how behind the ECB is in comparison to the Fed.
- Esther Reichelt, a Commerzbank analyst, comments that with the increasingly gloomy economic outlook, the question of whether the European Central Bank will raise its key interest rate is becoming a problem for the euro.
- The focus has shifted towards potential rate cuts in some scenarios, which could provide a boost to stock markets and cryptocurrencies, increasing liquidity and reducing borrowing costs.
