The U.S. Dollar’s moves have been insignificant compared to the reaction in equities over the central bank action that took place this week.
Overview
Overall, the buck has been steady, currently on a downward trend as markets digest the reality of COVID’s resurgence ahead of holidays as well as the decisions by central banks to tilt towards tightening monetary policy despite concerns.
Inflationary growth has proven to be too high for comfort, which mandates that at the very least quantitative easing purchases are slowed down or taken off the table. Measures that have kept an accommodative environment for equities to thrive seem to be destined to fade away, thus mounting fears of a major correction to the risk-on sentiment of this year.
While the buck initially seemed destined for stronger ranges after the Fed established its decision to taper quicker than economists anticipated, other currencies are now the ones benefitting from the idea of more hawkish policy in their regions.
Omicron and Delta variants are ravaging the U.S. as hospitalizations and the number of people reporting positive tests at home are increasing at a very fast pace. We hope, with the rest of the world, that indeed any effects are mild and that it is something we are more prepared than at any point in the pandemic to overcome.
What to Watch Today…
- No major economic events scheduled for today
WOW, IT’S A ‘FOUR-PEAT’ | Top MXN Forecaster for Last 4 Quarters
Bloomberg ranks Monex for MXN, G10 Currencies, and NZD! Learn More
EUR
The Euro is slightly climbing based on this week’s decision by the European Central Bank to close its emergency bond-buying in March of next year while looking to add to asset purchases in Q2.
Much of the narrative from the other side of the Atlantic was that the ECB would not determine an end to PEPP (Pandemic Emergency Purchase Program) until it exuded more concern over inflation, which ECB President Christine Lagarde kept dismissing.
With Consumer Price Index figures for the Euro-zone at 4.9% for the year’s average and ongoing half percent growth month-over-month, there is comfort in taking the foot off the gas from policymakers.
GBP
The Pound is at its best level since November 26th as markets were surprised by the Bank of England’s decision to hike interest rates by 15 basis points. The decision was one that the BOE struggled to agree with, but price growth in the U.K. is an impediment to the recovery.
Governor Andrew Bailey seemed determined to hold on and wait until next year, but this move surely sets Sterling for short-term gains. Ultimately, the hawkishness must be accompanied by better data going forward or Pound will remain limited in appreciation.
Ready to spin the currency market moves in your favor?
Discover HOW WE Can HELP You SEND or RECEIVE PAYMENTS
