Last week, US equities reached new all-time highs, thereby lifting global stock markets. This came on the back of Federal Reserve Chair Jerome Powell’s dovish policy statement. In that speech, Powell touted considerable progress in bringing down inflation, notwithstanding the bumps in the road toward the two percent target.In its policy meeting last week, the Fed kept its policy rate unchanged at 5.25 to 5.50 percent. The 2024 dot plot was likewise unchanged at 4.
“We know that reducing policy restraint too soon or too much could result in a reversal of the progress we have seen on inflation and ultimately require even tighter policy to get inflation back to two percent.” “Of course, we are committed to both sides of our dual mandate, and an unexpected weakening in the labor market could also warrant a policy response.”The strong US economy and the US-led bull market in stocks caused the US dollar to strengthen despite Powell’s dovish statements. Below, we discuss the move of three major currencies that weakened against the US dollar last week.
Japanese yen. The Bank of Japan implemented its first rate hike in 17 years, thereby ending its negative interest rate regime. With the normalization of interest rates in Japan, the yen should have strengthened. However, the interest rate differential remains wide and the yen weakened as the USD-JPY rate breached $150.
In an interview with CNBC’s Jim Cramer, Nvidia’s president and CEO Jensen Huang said that “we’re in the beginning of the accelerated computing ramp. It’s going to last a few years.” In describing the significance of the ongoing AI industrial revolution, Cramer said, “I think AI’s bigger than the loom or the steam engine or the jet engine or the mainframe or the microprocessor, perhaps all rolled into one.