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Rate Changes Provoke Forex Market Turbulence




  • Interest Rates Move Markets Early
  • Euro and Pound Both Continue to Struggle
  • Stock Turmoil Again as Slide Lower Keeps Going

It was a somewhat wild start to the day for the forex market. Rate changes saw the market go through a turbulent time early on before regaining some composure later in the European session. Interest rate increases in the US and UK played a role. The Swiss National Bank too raised rates while Japan took the drastic step of intervening in the country's currency market. This set other currencies into overdrive as the Euro and Pound tumble continues. Stocks have also continued to be pounded with major markets in the red again. 

Traders Take Note of Interest Rate Moves

Given the ongoing inflation issues in the US and global economies, rate hikes had been more than expected. That still did not help in taking away the movement felt when major rate increases were announced. In the US the Fed went ahead with a 75 basis point hike and indications they will continue to raise rates again by this figure in November. The UK also increased rates by 0.50% to 2.25% as expected. The Swiss National Bank (SNB) opted for a 75 bps hike. 

There is widespread belief among policymakers that increasing rates will counter the hot inflation issue. Some analysts though are now starting to wonder if the moves are a step too far in that direction following a pandemic period of very supportive moves. Some including prominent investor Cathie Wood and Elon Musk have commented recently on the risks of deflation. 

No Improvement for Euro or Pound

The strife continues for non-USD currencies. The Euro has again moved below parity and is getting further into the depths. The common currency now sits at just $0.98 against the Dollar. This point marks yet another new low in recent years for the pair. Data from Europe was unhelpful too. This continued to contract as the entire region suffers. 

The bloc is not alone. In the UK, the Pound crashed lower as the new government there announced a series of bold economic reforms. The currency took the news and moved to its own new low against the Dollar. The pair was trading at $1.11 at the time of writing, a multi-decade low representing losses of more than 1.5% on Friday alone. 

Stocks Slip Even More

Forex brokers and traders were not alone in their pain on Friday. Stocks on Wall Street have also continued their fall on the back of what has been seen as over-tightening from the Fed. This seems to have surprised the market, along with the fact that Japan has intervened in the JPY, often held as one of the most prominent safe haven currencies. 

Prior to the opening bell, the Dow Jones has dropped by more than 350 points or 1.2%. The S&P and Nasdaq are both also showcasing similar dips before trading opens for the last day of the week.

Anthony is a financial journalist and business advisor with several years’ experience writing for some of the most well-known sites in the Forex world. A keen trader turned industry writer, he is currently based in Shanghai with a finger on the pulse of Asia’s biggest markets.