The U.S. Dollar is trading in weak rages with a revival of risk appetite throughout the Asian and European trading sessions based on a reasonable reaction to European Central Bank Policy.
Overview
While plenty of uncertainty remains, one thing that is clear is that the ECB is ready to tackle inflation aggressively while, in turn, giving back to those interested in holding Euro-denominated debt with positive-territory interest rates. It is a policy change worth the over half-percent uptick across FX peers. Natural gas prices are easing as EU leaders gather to cooperate in coping with less Russian imported fuels.Very sensitive 2-year treasury bond yields are easing, although they remain near their highest levels since 2007, while the Bloomberg Dollar Spot Index seems to be down a full one percent. At the moment, the thoughts of recession are being ignored for a future in which inflation is subdued and the overtightening of financial markets ease. War and other worries may not fade, but these developments aid in painting a more positive outlook if things work out and data points reveal less doom than expected. Tons of inflationary data next week will guide the buck.
We, of course, root for Euro spiking as we see now a more united front in the Euro-Zone as well as EU to resiliently make it past winter to offset Russia’s exports and economy.
What to Watch Today…
- No major economic events are scheduled for today
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EUR ⇑
The fresh hawkishness displayed by the ECB has caused a rally that has Euro at its highest point in three weeks. Determined now to hike as needed, investors and traders feel the ECB will be able to put financial concerns aside and cultivate some momentum for Euro-strengthening along the way.
We are indeed bullish and have been somewhat hopelessly so in the Summer, and it may pay off towards the end of the year when higher interest rates are expected to be established. Can recessionary pressures be overinflated? That is what will determine if Euro heads further up.
GBP ⇑
Bank of England and even English Premier League games are postponed as our friends on the other side of the pond take time to mourn their beloved leader. Queen Elizabeth II witnessed a rapid period of economic, technological, and political change that put the U.K. in a place of both dominance and desperate need. From the steam engine to the smartphone, the royal figure has been a staple of leadership for Britain and its traditions, and we share with the globe in sending our condolences.
