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Financial Markets Update for October 29th, 2021

AUD rates were still in focus when the RBA yet again didn’t defend its yield target. Economists at Citibank expect the AUD/USD to move back lower because the 0.7550 level proves to be a tricky resistance.

A pullback in commodities dampens the AUD
“The RBA determined to not defend its 3-year yield target 0.1% that sent the April 2024 bond yields soaring. That has increased the conviction of the market players that RBA may shift more hawkish in their forward guidance. However, as reflation bets move towards stagflation ones, the AUD struggles, particularly with the pullback in commodities that has kept it supported all month.”

The USD/CAD pair quickly recovered around twenty pips from daily lows touched within the last hour and was last seen commerce with modest intraday gains, around mid-1.2300s.

The pair continued with its struggle to realize any purposeful traction and continued with its two-way worth move in a very slim commerce band for the second sequential day on Fri. An additional hawkish BOC acted as a tailwind for the domestic currency and capped the upside for the USD/CAD pair. That said, a combination of factors extended some support to the major and helped limit losses, at least for the time being.

Crude oil costs did not take advantage of the nightlong goodish rebound from two-week lows, instead met with a resistance undermining the commodity-linked loonie. The intraday transaction within the black gold followed reports that OPEC and its allies (OPEC+) cut 2022 oil demand growth outlook slightly to 5.7 million barrels per day. Excluding this, a solid US dollar rebound from one-month lows extended some support to it.

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EUR/USD gives away part of the recent strong advance and recedes after two consecutive daily pullbacks, always on the back of some profit-taking mood and a decent recovery in the greenback at the end of the week.
The corrective downside in the pair comes amidst a recovery in yields of the US 10y reference note and its German counterpart to 1.61% and -0.10%, respectively.
The pair, in the meantime, seems to have already digested the ECB event on Thursday, where Chairwoman Lagarde failed to push back market bets for lift-off next year in a more convincing fashion.

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