Australian Central Bank
The Australian Central Bank surprised the markets on the morning of Tuesday, May 2, when it raised interest rates by 25 basis points, which is higher than expectations, which were referring to 3.60%, bringing the interest rate in Australia to 3.85%.
As a result of this decision, the Australian dollar rose against the US dollar by 1.45%, to end the week with a gain of 2.25%, despite the positive employment data recorded in the United States on Friday, May 5th.
Interest rate decision by the Federal Reserve and US employment data
The Federal Reserve raised the interest rate by 25 basis points, to reach the rate of 5.25%, and this was the most prominent thing that was mentioned in the press conference of Federal Reserve Chairman Jerome Powell:
Interest rates are not on the table at the moment
– Next interest decisions will be determined at each meeting
It is too early to say that the monetary tightening cycle is over
The peak rate hike depends on the economic data
US employment data for the month of May was released on Friday and recorded a very positive reading, as employment in the non-farm sector increased by 253 thousand jobs, which is higher than the market expectations that were referring to 181 thousand jobs and the previous month’s statement, which recorded 236 thousand jobs, which also declined Unemployment increased by 0.2%, to record a rate of 3.4%, below expectations that indicated 3.6%, and average wages were also released positively, rising by 0.5%. All of this data is very positive for the US dollar and indicates the strength of the labor market in the United States by all measures, and its ability to Maintaining its bullish momentum even in light of the hikes we are seeing on interest rates
How did the markets react to this data?
– The US dollar index increased by 0.36%, to reach the level of 101.555
– The Nasdaq rose by 2.74%, erasing all its losses for this week
– The Dow Jones rose 1.95%, erasing half of its losses for this week
– The S&P500 rose 2.55%, erasing half of its losses for the week
– The biggest loser was gold, which fell by 2.40%, erasing all its gains for this week, and trading below the 2000 level.
Euro-zone
The European Central Bank raised interest rates by 25 basis points to reach 3.75%, and this was the most prominent statement in the press conference of European Central Bank President Christine Lagarde:
Inflation expectations in the eurozone remain very high
Stop raising interest rates is not an option
– The journey of reducing inflation is long and we have not reached it yet
– Raising interest rates is useful for European banks to compensate for losses
– We continue to work on reaching an inflation rate of 2%.
