The AEX price has light red figures today due to a relatively strong US dollar. The dollar has been in trouble since the US central bank’s sharp interest rate cut on September 18, but strong data from the labor market is now changing that.
Problems for the AEX?
In the short term, the positive data from the American labor market seems bearish for the AEX. This data means that the market has to scale back its expectations for the US central bank’s interest rate policy.
While people previously expected an interest rate cut of 0.50% in November, the market now seems to be betting on a slightly smaller interest rate cut of 0.25%.
This will mean that the US dollar will weaken less and we are now seeing a recovery in the world reserve currency.
Conclusion? After the first interest rate cuts on September 18, the market accelerated a little too quickly. It now appears that we have to be a little more patient with the interest rate cuts and that is not a problem at all, because the strong data for the American economy seems to have averted a recession for the time being.
A story with two faces
So it is a story with two faces for the AEX. In the short term, it will be a tough pill to swallow and we will see the US dollar rebound, at the expense of the rest of the market.
While on the other hand this means that we may get a soft landing and that is the only scenario in which the bull run has a good chance of continuing.
In any case, a bull run and a hard landing is a combination that is unlikely. The only way that would happen is if we get into a hyperinflation scenario, because people would completely lose confidence in the US dollar.
However, the chance of such scenarios is minimal. Why? Because there is simply no alternative to the US dollar at the moment.
Source: https://newsbit.nl/aex-koers-duikt-omlaag-door-sterke-amerikaanse-dollar/
