The declining rate debate

14 October, 2015

At the start of the year the debate was centred on when the major central banks (principally the UK and US) would start raising interest rates, despite the fact that many central banks were easing. But the reality has proven to be very different. There has been a second Fed governor yesterday saying that the Fed should not raise interest rates this year (Tarullo) and the market views this as the more likely outcome from the two remaining Fed meetings of the year. With headline inflation having fallen below zero yesterday, the UK is in even less of a hurry to increase rates, with the focus today on the labour market data, where some signs of slowing have been seen of late. Sterling saw more weakness against the resurgent single currency yesterday, EURGBP moving up to levels last seen early Feb of this year. The bottom line is that the interest rate story is becoming less relevant for the major currencies and is also reducing overall volatility.

Elsewhere the Aussie has continued to weaken overnight on the back of the recent strong rally, briefly down to the 0.72 level. Australia’s second large bank (Westpac) increased mortgage rates overnight combined in a capital raising package, which did put some downward pressure on the currency given the risk that other bank follow through on this and make an interest rate cut from the central bank a bit more likely at the margins. We’ve also had comments from New Zealand central bank head Wheeler, again re-iterating the scope for a further interest rate cut should conditions allow. The kiwi was initially weaker on the news, but managed to recover losses towards the end of the Asia session.


Source link  
Yuan and Dollar as a weapon in trade wars

The US Nonfarm Payrolls on Friday could even be called boring: the report showed the preservation of a completely healthy labour market...

Disappointment with Fed and tariffs

Trump announced 10% tariffs on Chinese goods worth $300 billion since September 1, thus ending the US-China trade truce after disappointingly...

Fed pushes down stocks

Markets have started the week under pressure. Expectations that the Federal Reserve will cut interest rates by 50 points in July collapsed...


Gold updates new 6-years highs

Gold benefits from a combination of two factors: lower interest rates in debt markets and continuing hopes that the global economy...

Markets recede from the recent highs

A strong Nonfarm Payrolls caused pressure on the stock markets, reducing the chances of the interest rates lowering by the Fed in the upcoming months...

Gold resumes rally, pushing past $1400

Gold prices resumed a push higher on Monday, as flows into the precious metal continued on improved prospects for easier monetary policy from...


Gold rises as markets slip

Market caution continues to support gold. Quotes of this metal rose to $1337, repeatedly trying to push above this year highs at the 1340-1360 area...

Trump says Brexit should happen

President Donald Trump promised the U.K. a "phenomenal trade deal" Tuesday, on the second day of his state visit to Britain...

Euro and Gold instead of Dollar

Gold rose on Monday to the highest levels since February, reaching $1327 per ounce. In the first hours of the Tuesday trading session, there...

  


Share it on:   or