Thursday, October 27: Stronger Dollars & Weaker Pounds
The Federal Reserve (the ultimate Feds) has raised interest rates five times this year, and if conditions remain as expected, they’ll likely continue to do so as long as inflation is high in the US. But these constant interest rate hikes are affecting global markets and prompting other central banks around the world to prop up their domestic currencies.
In Egypt, the currency (EGP) is trading at its lowest levels ever against the dollar. As a kid I remember the exchange rate being four or five Egyptian pounds to the dollar, but yesterday it broke past 22 EGP/USD after a surprise interest rate hike. Egypt has been in talks with the IMF (that’s International Monetary Fund, the ultimate bad guys) for a new loan since March after its economic problems deepened due to the war in Ukraine. Yesterday, Egyptian authorities announced a $3 billion IMF deal and tanked the economy in the process.
As someone thankfully unlearned in the dark arts of economics, I understand that global markets are interconnected, with prices for assets around the world linked to one another. So it should come as no surprise that rising U.S. interest rates have prompted volatility in global currencies, bonds and equities, causing market instability. If there’s one thing they taught us in ECON101 it’s the need for the market to react suddenly and unpredictably.
“The Fed has pushed financial markets in one direction really fast. Markets need time to adjust.”
-Claudia Sahm, former Fed, current founder of Sahm Consulting…not very creative
Side Items
No Solutions in Ukraine: The idiots in charge of the White House went and said the quiet part out loud yesterday, as the National Security Council said, “Neither side is in a position to sit down and negotiate.” Uhh yeah…Ukrainians are fighting glorified trench warfare and Russia is repatriating Ukrainian orphans, I don’t think this is a great spot to start negotiations guys. In another life perhaps I could’ve been a valued member of the military intelligence community
Only in America: A new Texas law allowing people to carry handguns without a license has led to more spontaneous shootings, can you imagine? In other news, water is still moist.
Herschel Walker is in Hell: A second woman came out with allegations that the smooth-brained former football star/republican senate candidate paid for her to have an abortion. Walker could admit it or deny it, but either way he’s an easier target until the midterm elections. I don’t pretend to know what goes through Walker’s brain (although I can’t imagine it’s too busy), but there must be a deep fear of actually winning this election and having to serve as a senator