Currency and commodity interest rate fantasies bolster the dollar economy

Good data from the US labor market pushed the dollar higher over the weekend. In turn, the euro fell to $ 1.1514, its lowest level in 15 months. The US labor market is recovering significantly from the pandemic crisis, fueling debate over when to raise interest rates. This speculation on rising rates tends to strengthen the dollar. The US Federal Reserve has already initiated the gradual exit from crisis mode this week. At the same time, given the rising inflation in the country, the question arises as to how long the Fed can wait to raise the key rate, which currently sits between zero and 0.25%. Kansas City Fed District Chief Esther George said the time was already running out for an increase: “With inflationary pressures, the argument for patience is less popular. In September, the US inflation rate climbed to 5.4%, well above the Fed’s 2% target. The Fed, supposed to ensure stable prices and full employment, cannot ignore this development. In his baseline scenario, however, he assumes that the spike in inflation is due to the pandemic crisis and will subside next year.

The fear of reducing supply bottlenecks has driven down the price of aluminum. On the Shanghai Stock Exchange, the futures contract fell seven percent per tonne. On the London Metal Exchange LME, the metal used in automotive and aircraft construction sometimes lost 1.7% of its value and, at $ 2,510 a tonne, was as cheap as it was two and a half months ago. “Falling coal prices in China reduce the risk of energy shortages,” write analysts at ANZ Bank. In addition, the costs of producing energy-intensive aluminum have fallen dramatically.

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