The US dollar’s run the last few months (and the rising interest rates fueling it) is helping wreck things on Wall Street. But both the greenback and bond prices are settling down this morning. Stocks are a bit weaker along with gold, silver, and crude oil.
On the news front...
The US dollar is back to its 2022 ways. In other words, it’s rallying strongly – leaving a “Doom Loop” in its wake. The catalyst is clear: Expectations the Federal Reserve will leave interest rates higher for longer, making the dollar and dollar-based securities more attractive relative to other currencies and securities denominated in them.
US Dollar Index (DXY)
Source: Yahoo Finance
Stated another way, higher US yields act as a vacuum, Hoovering up global funds to US shores. That can make US goods more expensive to global buyers, while also reducing the value of sales earned in foreign countries to US multinationals. As a result, the rising dollar is one contributing factor to the recent struggle in stocks.
What do the higher rates that are driving the dollar move mean for average Americans? Higher mortgage rates. Higher credit card rates. Higher auto loan rates. You name it! Bankrate.com has been tracking rates on a wide variety of loan and deposit products since the 1980s. The average credit card now sports an interest rate of 20.71% -- the highest on record.
In Washington, the clock keeps ticking down to Sept. 30. If funding bills aren’t passed in Congress by then, the US government will likely go into shutdown mode. Markets will be watching a key vote in the House of Representatives today to see if House Speaker Kevin McCarthy can get the hardliners who are holdings things up to start budging.