![]() ![]() The bank adds “While it is still our baseline that the Dollar should depreciate somewhat from current levels, it is important to note that there has been very little progress on either of these necessary preconditions so far.” Rabobank added “Because of the reacceleration of the economy, and the modest impact of the banking turmoil on credit conditions, we now expect the FOMC to resume the hiking cycle in July in order to get inflation under control.”Īccording to Goldman Sachs, clarity on a peak in Fed interest rates and an improved outlook for the Euro and yuan will be needed for the dollar to weaken. Instead, we expect the Fed to say that inaction in June is more akin to a skip – for now – and the committee retains upward bias to its policy rate path.” Fed Decision in FocusĪccording to Bank of America “We do not believe the Fed is close to signalling a prolonged pause. MUFG added “A surprise Fed rate hike will be required to inject renewed upward momentum in the USD and threaten an unwind of FX carry trades that have benefitting from falling FX volatility in the 1H of this year. The Pound to Yen (GBP/JPY) exchange rate, for example, has posted 7-year highs above 175.50.Īccording to ING “Low levels of FX volatility will continue to favour carry trade strategies unless we see some major dislocation in the US rates market or some financial system stress re-appear.” These capital flows have been a key element providing additional Sterling support. With low volatility across global markets, there has been renewed interest in buying high-yield currencies with low-yield units being sold. The potential support from the impact on high yields has been magnified by the strong interest in carry trades. It adds “Let's see whether tomorrow's data gives BoE Governor Andrew Bailey the chance to push back against those aggressive tightening expectations when he testifies to a House of Lords committee tomorrow afternoon.”Īccording to Unicredit “Investors will likely also be paying attention to new economic data due to be published in the UK ahead of BoE’s meeting on 22 June and, in particular, to GDP data for May.”Īccording to Fiona Cincotta from City Index "Sticky inflation raises the prospect of more interest rate hikes from the BoE, in contrast to the Federal Reserve, which is widely expected to pause interest rate hikes in June with another possible rate hike in July." Carry Trades Remain in Vogue It adds “We think softer wage and price data could emerge at any time and that market pricing of the Bank Rate (now at 5.50% for 24 January) is subject to a sharp downward revision.” There will be UK and domestic influences over the next few days.Īs far as the UK is concerned, ING is sceptical that the data will support the Pound. Higher yields have provided important net support for the Pound. There was a further move higher in yields on Monday with the 2-year yield at 8-month highs close to 4.60%. UK Gilts lost ground on Friday with the 2-year yield moving to the highest level since October. Nordea added "FX markets should be subdued today because of the important meetings from the Fed and ECB on Wednesday and Thursday." UK Yields hit 8-Month Highs This will be an important week for markets with big data releases on both sides of the Atlantic and key central bank policy decisions.Īccording to BNY Mellon “The Federal Reserve, ECB and Bank of Japan all hold policy meetings this week and will provide guidance not only for the second half of the year, but potentially also the next phase of the tightening cycle.” The Pound to Euro (GBP/EUR) exchange rate also posted 9-month highs just above the 1.1700 level before a limited correction to 1.1685. ![]() GBP/USD corrections remained limited and again tested the 1.2600 area on Monday. The Pound to Dollar (GBP/USD) exchange rate maintained a firm tone on Friday with highs just below the 1.2600 level around the European close. ![]()
0 Comments
Leave a Reply. |