Stocks rise and dollar falls as investors assess political outlook
Euro and pound rise by 0.75 percentage points against the greenback a day after the ECB raised interest rates
Andrew Friedman (AF)September 7, 2026
Global stock prices rose Friday, while the euro and the pound gained against a weaker dollar as investors assessed the extent to which major central banks would tighten monetary policy to curb inflation.
The FTSE index of global shares rose 0.7 percent, while Europe's Stoxx 600 gained 1.7 percent and Hong Kong's Hang Seng rose 2.7 percent, ending six days of losses. The FTSE 100 rose 1.5 percent.
Futures contracts tracking Wall Street's S&P 500 climbed 0.9 percent and those tracking the tech-heavy Nasdaq 100 gained 1.2 percent. "It appears to be a global risk rally in the face of lower interest rates and a weaker dollar," JPMorgan analysts said. "The market remains focused on next week's consumer price index release," they added.
Economists polled by Reuters expect an 8.1 percent year-on-year reading for August, up from 8.5 percent in July.
Friday's measures came a day after the European Central Bank raised interest rates by 0.75 percentage point to 0.75 percent after cutting borrowing costs by half a percentage point to zero in July for the first time in more than a decade. The new U.K. government also announced Thursday a package estimated at 150 billion pounds to protect Britain from rising energy prices.
In currencies, the euro gained 0.6 percent to trade just above parity with the dollar, reversing a sharper rise earlier in the day. The single currency has fallen more than 11 percent this year as economic uncertainty and inflationary pressures - fueled by Russia's incursion into Ukraine and a tightening of gas supplies - have driven people to the perceived safety of the dollar.
The pound also rose 0.6 percent to $1.158 after falling earlier in the week to its lowest level since 1985, according to Bloomberg data. The Japanese yen rose as much as 1.8 percent to 141.49 yen after hitting 144.98 yen on Wednesday, the weakest level in 24 years against the dollar.
Those gains were offset by a weaker dollar, which lost 0.6 percent Friday against a basket of six equivalent currencies.
Federal Reserve Chairman Jay Powell had reiterated Thursday that the central bank must "act bluntly" in fighting inflation and "stay the course until the job is done." Markets are anticipating a likely 0.75 percentage point rate hike for the world's largest economy when the central bank announces its next monetary policy decision in late September, which would be the third consecutive increase of that magnitude.
Meanwhile, the ECB's hawkish rhetoric this week has led some analysts to expect another big hike at its October meeting, with Deutsche Bank expecting another three-quarter-point increase.
German bonds sold off sharply after the ECB decision and press conference on Thursday, with the two-year Bund yield rising to its highest level since 2011 while its price fell. Activity was quieter on Friday, with the same yield falling 0.03 percentage points to 1.29 percent and the yield on the 10-year Bund falling a similar amount to 1.68 percent.
