While the US dollar was hovering at its lowest level in months against its peers in September, the USD quickly rebounded back to reach its highest level since the beginning of the year, according to the Bloomberg Dollar Index.
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The Euro Zone is facing growing concerns over rising inflation and potential action from the European Central Bank (ECB), as inflation might be more “structural” than previously expected, as declared by ECB’s Vice President de Guindos. This would mean that the ECB might have to respond quicker than expected to accomplish its mission of “price stability”.
If the ECB were to increase interest rates or slow down its bond-buying programs, this would strongly impact the value of the single currency, which has been weakening against the USD. Investors should monitor any new updates on inflation and monetary policy decisions, press conferences, and declarations.
The UK Pound suffered from the recent rise of the US Dollar, as well as the fuel crisis that has plagued the UK recently. Not to mention that the direction of inflation is also a worrying policy market, with the current inflation rate at 3.2% against a target of 2%, according to the Bank of England (BoE) figures.
The rhetoric of the central bank has subtly changed recently, as it isn’t ruling out the possibility that current inflation could remain on the upside for longer than anticipated, which might force the BoE to act in order to maintain prices around the 2% target. Brexit and all the agreements required for the United Kingdom to go forward and cut its relationship with Europe are also affecting the value of the pound, while also exacerbating the fuel crisis.
Investors will have to closely follow the evolution of the fuel crisis in the UK, along any developments regarding the status of Brexit, inflation figures, and any comments and decisions from the Bank of England.
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