FXTM information and reviews
FXTM
93%
IronFX information and reviews
IronFX
92%
Libertex information and reviews
Libertex
91%
FXCC information and reviews
FXCC
90%
Markets.com information and reviews
Markets.com
89%
FxPro information and reviews
FxPro
88%

All quiet before ECB and US CPI; dollar resists slump in yields


10 June 2021

Trading got off to another lacklustre start on Thursday, with major currencies and equities subdued and the volatility confined to the bond market. However, the unusual lull is unlikely to last much longer as the European Central Bank is due to announce in the next few hours whether it will continue to buy bonds at a “significantly higher pace” or if purchases will be slowed slightly.

ECB policymakers have gone all out lately to dispel any speculation about early tapering. However, the most dovish the ECB can get is to signal that it will use the full PEPP envelope, as an extension of the programme is extremely doubtful. Still, with investors not having to worry about the cut-off point until March 2022, maintaining an accelerated pace for now might just be enough to keep markets happy and the euro tamed.

That puts all the more pressure on President Christine Lagarde as any slipups about future adjustments to the pace of asset purchases in her press conference at 12:30 GMT could undermine the dovish message. With future policy changes likely to dominate discussions at the Federal Reserve when it too meets in a few days’ time, today’s CPI numbers out of the United States will be watched for any possible clues about a tapering timeline.

However, regardless of how strong the headline CPI rate comes in for May, the Fed is only expected to take baby steps towards slowing its bond purchases and the recent moves in the bond market might play a bigger role in the scale of any fallout.

Are the doomed infrastructure talks to blame for the slump in yields?

Government bond yields globally have been heading south all week, led by US Treasuries. There doesn’t seem to be a clear catalyst for sparking this rush towards government bonds as nothing has fundamentally changed as far as Fed policy or the inflation outlook are concerned. However, one possible explanation could be the setback in Washington by the Biden administration to find support for its legislative agenda.

Talks to reach a bipartisan deal on a big infrastructure bill have run into trouble this week. But Republicans are not the only problem as President Biden is also having a hard time convincing moderate Democratic Senators to back his ambitious spending plans. Furthermore, with time running out to pass major legislation ahead of next year’s midterm elections, Biden’s spending goals are looking unattainable right now, and for the bond market, that can only mean there will be significantly less supply on the way over the next few years than anticipated not so long ago.

The 10-year Treasury yield was somewhat steadier today, inching up to 1.4975% but not far from yesterday’s one-month lows.

Stocks look to ECB, US data for direction

In equities, there was little support from the lower yields as doubts about the next phases of Biden’s pledged stimulus weighed slightly on risk assets. But overall, markets were focusing on the ECB and US inflation data, as well as on the latest weekly jobless claims, to get a sense of direction.

European shares were mostly lower on Thursday and US stock futures were mixed following small losses on Wall Street yesterday. Asian stock markets had a moderately better session, lifted by positive trade talks between US and Chinese officials.

Pound slips as UK-EU row rumbles on, virus cases rise; euro awaits ECB

However, discussions between Britain and the European Union to resolve the row over customs checks with Northern Ireland have not been going so well, dragging the pound below $1.41 today. Negotiations to end the deadlock are ongoing but Brexit woes are not the only headache for sterling as daily Covid infections in the UK topped 7,000 on Wednesday – the highest since late February, threatening to pause any further relaxation of virus curbs.

The euro was also weaker ahead of the ECB announcement, but only marginally, while the loonie was little changed after the Bank of Canada kept policy on hold yesterday, as expected.

The Australian and New Zealand dollars fared slightly better, edging up versus the greenback, which was unusually steady in spite of all the action in the Treasury market. The dollar index nudged up on Thursday, having bounced back from a brief spike lower yesterday.

By XM.com
#source

Related

Brent Crude has cleared its way for $100
Brent Crude has cleared its way for $100

The Gas Armageddon doesn’t look likely to leave Europe anytime soon, with its effects trickling more and more clearly into related markets. Brent crude updated...

28 Sep 2021

Strong Durable goods orders are bullish for USD
Strong Durable goods orders are bullish for USD

US Durable goods orders notably exceeded expectations (+0.7% m/m), adding 1.8% in August after rising 0.5% a month earlier. The rise here is a signal of confidence of US...

28 Sep 2021

Yen and tech stocks bleed as yields march higher
Yen and tech stocks bleed as yields march higher

The specter of rising interest rates has returned to haunt financial markets. The Fed breathed some life back into Treasury yields last week after it opened...

28 Sep 2021

S&P 500 H4: Bulls are in the reign
S&P 500 H4: Bulls are in the reign

The S&P 500 on the H4 time frame was in a down trend until a lower bottom was reached on 20 September at 4306.5. After the lower bottom, bulls gathered...

27 Sep 2021

Stocks up as markets look to Berlin & Washington
Stocks up as markets look to Berlin & Washington

Stocks are higher in early trade in Europe, with the DAX jumping 1% at the open as it looks as though Germany is heading for a traffic light coalition - more left, more green...

27 Sep 2021

No clear winner in German elections
No clear winner in German elections

Euro pulls back after inconclusive German election. Dollar balances faster Fed hikes against fading Evergrande fears. Wall Street and oil prices keep climbing ahead of busy week...

27 Sep 2021


Forex Forecasts

OctaFX information and reviews
OctaFX
86%
HotForex information and reviews
HotForex
85%
XM information and reviews
XM
80%
FXCM information and reviews
FXCM
79%
Vantage FX information and reviews
Vantage FX
78%
Moneta Markets information and reviews
Moneta Markets
77%

© 2006-2021 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.