Forex News June17, 2022

European equities begin the day slightly higher and the top forex news included a volatile yen and a weaker Euro.

Eurostoxx +0.2%, Germany DAX +0.4% & UK FTSE +0.2%

Stocks are looking for a light bounce after yesterday’s heavy selloff.

• CAC 40 +0.4% in France

• IBEX +0.2% in Spain

Despite a brief respite – for the time being – equities have had a rough week in general.

The Nasdaq is set to fall below its 200-week moving average, making things even worse for US indices.

The S&P 500 futures are up 0.5 percent, the Nasdaq futures are up 0.6 percent, and the Dow futures are up 0.5 percent on the day.

However, it is still early in the day, and with the sentiment on a knife’s edge, a lot can change before the weekend’s end.

After yesterday’s tumble that created much forex news, the dollar regains some ground. It was difficult to make sense of the dollar’s sharp drop yesterday, which coincided with a more risk-off mood in markets.
However, as the BOJ maintained its easy policy, the USD/JPY has made a strong recovery. Flows are seen back into the dollar as calmer heads prevail – at least for the time being.
The only currency fighting back against the dollar today is the franc, and for good reason, given the SNB’s policy shift this week.
For the time being, the technicals are the place to be, and dollar bulls are making their case. With GBP/USD pulling back to near 1.2300 and AUD/USD falling back below 0.7000 on the day after hitting Fib retracement level resistance.

The spread between 10-year Italian and German bond yields has returned to less than 200 basis points.
European bond markets have continued to respond to the ECB’s pledge on anti-fragmentation. Ignazio Visco, an ECB policymaker, stated yesterday that “levels above 200 bps are not justifiable” and that “a differential of fewer than 150 bps would be justified by the fundamentals.”
If the ECB decided to issue a challenge to markets, they should have been prepared to take it when it came.
Policymakers breathe a little easier for the time being because European bond markets are reacting favorably. Further, more details and a solid plan are required to calm nerves for an extended period of time. For the time being, spreads are “normalizing.”

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