Last week, there were sharp swings in USDJPY, a decline in oil prices, and a surge in Tesla stock. What's next?
Greenback dives to wager on Fed rate reversal
On Thursday, the evergreen buck faced heavy losses in Asia because the key US bank shocked the financial markets by giving up all of its plans to have rates lifted in 2019, which appears to be an indication that its three-year campaign to stabilize its monetary policy might be at an end.
Market participants rushed to price in the likelihood of rate cuts a bit later in 2019. Meanwhile, Treasury yields headed south to their lowest value since early last year.
The Fed's swerve pressured the evergreen buck, pushing it down to 110.67 yen – a 0.6% dive – the most impressive descend since the flash crash of early January.
As for the common currency, it rallied to a seven-week maximum, hitting $1.1424, rebounding from its recent minimum of $1.1177. It pushed the greenback down to 95.929 versus a group of currencies, having dived 0.5% overnight.
Previously, the Fed had tipped two rate lifts in 2019. Additionally, the major US financial institution also trimmed its estimates for inflation and economic surge, while increasing that for unemployment.
Yields on two-year notes headed south to 2.40%, which is in line with the effective funds rate, while five-year yields declined to 2.33%.
For the US currency, the only solace was the fact that other major banks worldwide have also turned quite dovish for recent months as surge speeded down pretty much everywhere.
The given need for stimulus simply means that many major financial institutions won’t be willing to see their currencies appreciate versus the evergreen buck, providing them with a reason to sound more accommodative.
Meanwhile, firm household spending along with business investment raised New Zealand’s GDP by 0.6% in the December quarter, assisting the New Zealand dollar to get to a seven-week maximum of $0.6923.
Geopolitical factors and inflation remain the main drivers of financial markets. Let’s see how to use that in trading!
Have a look at the key financial instruments on Monday, February 28. Geopolitics is currently on all news frontlines. Western nations escalated sanctions on Russia for the invasion of Ukraine.
The Australian Bureau of Statistics will announce the updated Unemployment Rate and Employment Change data on Thursday, May 19, at 04:30 MT.
The UK Office for National Statistics will publish Consumer Price Index (CPI) data on Wednesday, May 18, at 09:00 MT.
The US Census Bureau will announce Core Retail Sales and Retail Sales on Tuesday, May 17 at 15:30 MT.