Bullard now wants a full percentage point of interest rate hikes by July 1
Wall Street stocks finished lower on Thursday after fresh economic data out of the United States showed consumer prices surged 7.5% last month on a year-over-year basis, exceeding estimates of 7.3%. Adding to a more downbeat tone, Fed’s Bullard said he now wanted a full percentage point of interest rate hikes by July 1. As such, the Dow Jones fell 1.47%, the S&P 500 shed 1.81%, and the Nasdaq Composite dropped 2.1%. Of note, the S&P 500 index is now down about 5% since the start of 2022 despite nearly 80% of the companies reporting stronger than expected quarterly earnings.
Similarly, Asian equity markets were on the defensive on Friday as the CPI report raised expectations the Federal Reserve will need to move aggressively to cool inflation. South Korean Kospi fell 0.87%, Hong Kong’s Hang Seng shed 0.38%, and China’s Shanghai Composite dropped 0.66%. In Australia, the S&P/ASX 200 lost nearly 1% after the RBA’s Lowe said that it is plausible if the economy tracks to the central bank’s forecasts rate hike will be on agenda later this year. Japanese markets were closed for a holiday.
Meanwhile, the dollar climbs along with Treasury bond yields after the data from the US showed the CPI climbed to a new four-decade high. Now, money markets are pricing a 90% probability of a 50 basis points rate hike in March. The USD index is now back around the 96.00 figure after the recent dip.
Against this backdrop, EURUSD dipped back below the 1.1400 figure to notch one-week lows around 1.1370 before trimming intraday losses marginally in recent trading. As traders continue to digest Fed’s hawkishness along with hot inflation numbers, the greenback will likely stay on the offensive in the near term.
