Dollar exchange rate with major currencies and crude oil prices today, 15 July

The June consumer price index report for the United States dashed hopes that inflation had peaked the month before jumping half a percent to 9.1 percent. The Federal Reserve may now contemplate going beyond a three-quarters of a percentage rate hike and raise interest rates by a full one percent for the first time since 1981.

“Everything is in play,” according to Atlanta Federal Reserve Bank President Raphael Bostic when the US central bank policymakers meet later this month to take further steps to put the brakes on rising prices. But the aggressive moves could trigger a recession, but that is considered the lesser of two evils. This along with other factors is surging the dollar and weakening the price of oil, at least for now.

The likelihood of other advanced economies falling into recession is becoming greater with record inflation being reported around the world. Taking along with the Feds previous rate hikes, the dollar has strengthened against other currencies as investors seek a safe haven from the looming tempest.

Worries of a global slowdown have also driven commodities prices to new lows with copper down 35 percent from an all-time high trading below $7,000 per ton for the first time since 2020. Crude oil has also slumped as China deals with more outbreaks of covid-19 with the highly contagious Omicron variant detected for the first time in Shanghai.

Recession fears and central bank policy strengthen dollar

Canada was the first among the world’s advanced economies to hike rates by a full percentage point. The European Central Bank will likely begin its own course of rate hiking next week, but likely with a more modest quarter point boost. Meanwhile, the Bank of Japan looks set to maintain ultra-loose monetary policy with the governor warning of “very high uncertainty” in the economic outlook and stressing a willingness to ramp up stimulus when needed to sustain a fragile recovery.

These actions and the fear of recession in advanced economies have caused the dollar to surge in comparison to its counterparts.

Most watched has been the performance of the euro which finally reached parity after weeks of falling against the surging dollar. Inflation, driven by fallout of the war in Ukraine, has dampened the economic outlook prompting fears of a recession in member nations giving the eurozone scrip a hammering.

Expectations that the European common currency could fall below the dollar were briefly realized on Thursday. Sterling hit another two-year low against the dollar on the same day, while the yen hit a 24-year low against the greenback. All three have since regained a fraction of their purchasing power.

US dollar exchange rates

Economic slowdowns driving slump in price of crude oil

While a strong dollar is good news for those who plan to travel abroad this summer, the cost of flights to get their may make their eyes water. Gone are the incredibly cheap deals available during the pandemic with the price of airline fare a whopping 34 percent from last year. This has been due to rising demand and compounded by the rising cost Russia invaded Ukraine and Western nations imposed sanctions on energy exports from the aggressor.

In March Brent crude peak at just below $135 and West Texas Intermediate (WTI) came close to $124. As fears grow of recessions in advanced economies and covid prompting a potential slowdown in China the price of oil has slid toward the $100 per barrel mark, falling below it on Tuesday. Both Brent and WTI saw significant gains prior to markets in the US opening with the former going back above $100.

Here is where the price stood at the end of trading on Thursday at the close.

Crude oil prices