The AEX price is at 974 points and is therefore approaching the magical limit of 1,000 points. However, it has not yet been possible to approach that rate, and that seems to have everything to do with the strong American dollar that we are currently seeing.
Strong dollar creates doubts
Last week it was time for the US central bank to make a new interest rate decision. Although they opted for an interest rate cut, the surprise came during Chairman Jerome Powell’s press conference.
He announced there that there are serious doubts about another interest rate cut in December.
The American economy is strong, unemployment is historically low, and inflation is still above the desired 2 percent. All in all, that does indeed seem sufficient for a central bank to doubt the need for interest rate cuts.
Apparently, however, the market had expected a different scenario. The market had already fully factored in the interest rate cuts and therefore assumed a scenario that was a bit too easy.
Now the US central bank is slowing down a bit, and we see the dollar starting to rebound. The dollar index (DXY) is currently trading at almost 100 points again.
Why is a strong dollar bad for the AEX?
In principle, a strong dollar is bad news for the AEX, because there are many loans outstanding in dollars worldwide. If the price of dollars then increases compared to other government currencies, it suddenly becomes more expensive to borrow capital in dollars in many countries.
It may then not even be attractive or possible for companies to borrow in US dollars, resulting in less capital flowing through global markets.
A stronger dollar can therefore reduce the pace of credit creation, which means that less capital is available for investments and therefore less can flow to the AEX.
Source: https://newsbit.nl/aex-koers-hakkelt-door-sterke-amerikaanse-dollar/
