Interest Rates US - Last FED Decision - Questions

Question

Dear all,

The last rate hike was a 75 BPS and we saw after the news came out that the dollar weaken, Gold had a pullback and US 30 has a bearish move.

Usually in long term should the Dollar not getting stronger as we are seeing an interest rate increase?

What would happen if the FED would have:

1) Rate hike of 50BPS?

2) Rate hike of 100 BPS or more?

Answer 1

If the Fed had only moved rates 50 BPS, I believe the bearish indicators you mentioned may have been mitigated a bit but lack the conviction to achieve stability.

On Wednesday, the Federal Reserve announced it's raising the fed funds interest rate target by 0.75% to a new range of between 2.25% and 2.5%, its second 0.75% rate hike in two months. Prior to the June hike, the Fed had not raised rates by >= .75% since 1994

The relationship between interest rates and USD ( we are the world's reserve currency) is a bit more complex than the cause and effect of our higher rates will attract foreign investment in Treasuries, banks and as foreign investment purchases dollars both rates and currency value are maintained. After things get better - it may be worth while to address: trade deficit, GDP growth (supply chain mgt) and meltdown in crytpo, as other inputs in the Summer Blockbuster, "Convergent: interest rate vs dollar "