European Shares Gain While Dollar Weaken as Fed Signals Rate Cuts Ahead

By Thea Felicity

Aug 22, 2024 11:29 AM EDT

Traders work on the floor of the New York Stock Exchange (NYSE) on July 24, 2024 in New York City. The Dow closed down over 500 points on Wednesday after disappointing earning results from Tesla and Google parent Alphabet.
(Photo : Spencer Platt/Getty Images)

European and US share prices went up on Thursday, August 22, despite the US dollar remaining low. According to Reuters, this is the market's reaction minutes after a recent Federal Reserve meeting, which suggested that the Fed might lower interest rates soon.

The meeting minutes further revealed that most Fed policymakers think a rate cut in September is probable if economic conditions are favorable. This news confirmed what investors had anticipated and helped boost their confidence in the market.

Market Update Before Fed Cut in Septmber

European stocks rose by 0.5% due to strong performances in retail and unexpected positive data on business activity in the euro zone. This helped offset a slow trading day in Asia, which experienced a massive decline earlier this month, per VCPost.

In the US, stock index futures were slightly up, Yahoo Finance remarked that this showed a generally positive market mood.

At the same time, oil prices began to stabilize after falling for five consecutive days. Crude Oil Prices reported that crent crude futures increased by 0.4% to $76.36 per barrel. This small rebound follows earlier concerns about global oil demand that had driven prices down.

Investors are now paying attention to updates on US fuel inventories, which could affect future price changes.

As previously mentioned, in currency markets, the dollar index remained little changed at 101.21 but had dipped to a yearly low of 100.92 earlier. The potential for US rate cuts has also influenced global central banks, with the Bank of Korea considering a rate cut in October and Bank Indonesia planning reductions later in the year.

The euro fell by 0.1% to $1.1128 after weaker-than-expected German PMI data, while the pound rose to a 13-month high against the dollar and strengthened against the euro, driven by solid British business activity data.