![]() ![]() The dollar was the primary beneficiary, gaining several per cent against most currencies. ![]() In February of 2022, Russia invaded Ukraine, causing a flight to safety in financial markets. The Fed went aggressive, hiking in March 2022 by 25 basis points and then lifting by increments of 50 and 75 basis points until a slowdown in early 2023. The Fed wasn’t the first major central bank to lift rates: the Bank of England (BoE) takes that crown, following hikes from Norway, New Zealand, and a few others. Additionally, US government bonds experienced an increase in value across the maturity curve. In mid-June 2021, when the Fed indicated the possibility of raising interest rates by 2023, the dollar started to appreciate in anticipation of potential future rate hikes. In April of 2021, headline Consumer Price Inflation (CPI) in the United States jumped from just above the Fed’s 2% target to 4.2%, a more-than 12-year high!īut just before this spike, inflation in the US caused Fed Chair Jerome Powell to seek to calm markets and the public by famously describing inflation as “transitory,” a moniker that was subsequently dropped by year-end as it was clear that inflation was, in fact, entrenched.Īt this time, the US dollar was trading close to the bottom of the six-year trading range, which was about the average valuation across the prior twenty years a period that took in the 2000 dot-com bubble, the 2008 global financial crisis, and the pandemic! With the recovery well underway and, pandemic-era lockdowns soon ending, inflation began to rise. The COVID-19 pandemic caused global central banks to take emergency action to support the world’s economies one such measure was the rapid cut in interest rates to record lows. Estimated reading time: 5 minutes King Dollar
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