Financial markets have been slowing down for the first two days of this week as traders paused to receive monetary policy announcements from major banks around the world, including the US Federal Reserve meeting next week.
Most of the day, the euro traded within 0.2% of its Tuesday near the dollar. It last increased by about 0.1% to $ 1.1607.
Big CAP Market stocks strengthened again on Wednesday after shocking statements from the Bank of Canada gave a volatility boost.
The move left the US dollar index lower 0.1% to 93.8240 after the dollar weakened against the Canadian dollar, the euro, and the Japanese yen. The greenback initially lost 0.7% of the Canadian dollar after the Bank of Canada noted that it could raise interest rates faster than previously thought. But the movement slowed down and left the US dollar lower by 0.4% compared to the loonie.
Prior to the announcement, which some considered to be a hawkish one, the Canadian dollar had depreciated to about two weeks low to its US counterpart.
“You’ll see more FX volatility and swings here,” said Ed Moya, senior market analyst at broker OANDA.
Traders will have a different view of inflation in each region, says Spirit, adding: “It will be very difficult to calculate the interest rate variation on other currencies.”
The Bank of Canada’s comments could be the start of a new assessment of how interest rates will fluctuate and affect financing as bankers try to support the recovery from the epidemic without fueling continued inflation even further.
The European Central Bank meets on Thursday and is expected to take a dovish stand.
The German government has cut its 2021 growth forecast for this year, as the challenges of supplying semiconductors and rising energy costs are delaying the recovery of Europe’s largest economy.
Germany’s 10-year bond yield fell sharply over a week and its yield curve declined.
Similarly, the U.S. yield curve flattened between the two-year and 10-year treasury yields below 104 base points, at least since August. The 10-year yield dropped below 1.53%. It reached 1.70% last week.
Reducing yields in developed markets this week may indicate concern, say, analysts, that major banks will err if they tighten policy ahead of time in the face of high inflation.
The Australian dollar rose 0.3% to $ 0.752 after data showed that Australia’s main inflation rose to six-year high in September, much to the market’s surprise. The data has resulted in an increase in short-term yields.
The Australian Reserve Bank meets on Tuesday next week and market pundits are at odds with the RBA policy makers’ insistence that there will be no inflation before 2024.
Against the Japanese yen, the US dollar depreciated by 0.3% to 113.7950 – still in the middle of the recent quarter and close to four years the high of 114.695 dollars that affected the yen last week.
The British pound fell 0.1% to $ 1.3740 after the U.S. Treasury Secretary presented British budget forecasts.
In cryptocurrency, bitcoin dropped to $ 58,100 – the lowest for a week and a half. cryptocurrency has dropped by more than 13% but was on track for its best month since February.