Source: Bureau of Labor Statistics
The level of interest rates in the United States has a broad impact on the world economy, as the US dollar is the world's main reserve currency. For this reason, the market is eagerly awaiting interest rate cuts from the Fed. However, positive employment data and the country's recent inflation figures, which registered 3.1% in January, indicate that the economy can live with the current restrictive monetary policy for longer. Therefore, we shouldn't see an easing of borrowing costs before June.
As the market's perception that interest rates will remain high for longer increases, US treasury yields have reacted, gaining strength in recent weeks. For example, the 2-year benchmark (2A T-Note) closed last Friday, February 16, at 4.65%, up 0.16 (+3.74%). This level hasn't been seen since mid-December, when many market bets took an interest rate cut in March 2024 for granted.
If, on the one hand, high interest rates in the world's largest economy are worrying because they make it difficult to access credit and reduce consumption, they are also worrying emerging countries and making them apprehensive, especially commodity exporters. As these products are generally traded in dollars, the strengthening of the American currency makes them more expensive, resulting in downward pressure on this market
The influence of market movements can be seen in the DXY, an index that tracks the performance of the dollar, which is up 2.96% (+2.92%) so far in 2024, and the BBG Commodities, an index that monitors the appreciation or devaluation of commodities, which is down 2.39% (-2.43%) this year. Thus, much of the ground gained by commodities since the end of last year is being lost, reflecting higher interest rates for a longer period than initially forecast.
