Bloomberg Surveillance · Thursday, July 23, 2026
Darren May, Senior FX Strategist at HSBC, distinguishes between 'good' and 'bad' interest rate hikes. Hikes into resilient economies like the US dollar are dollar-positive, while hikes in economies with questionable growth, like the ECB or BoE, are at best ambiguous for their respective currencies.
“I think one of the distinctions I quite like at the moment is between a good interest rate hike and a bad interest rate hike. And you know, at the moment we've got renewed escalation and oil prices, right, so everybody's getting more hawkish about ECB banking and the FED. Normally, for currency markets that's a wash, right because your rate differentials don't move. That's the currency angle.”
“But I think a lot in terms of how the currency market should react to that will be determined by how activity is going into the hike, right, So you have a FED where activity is relatively resilient, the labor market's resilient, you hike into that. I think it's unambiguously dollar positive. The ECB, the Bank of England, where you've got question marks over activity and growth and they're kind of forced into a hike because inflation's misbehaving. That for me is at best ambiguous for the currency, but potentially a negative for the currency.”