Forexlive Americas FX news wrap: Dollar drops in another risk rout


Markets:

  • Gold up to $21 to $1854
  • US 10-year rates down 15 basis points to 3.32%
  • The S&P 500 down 123 points to 3,666, or 3.25%
  • Nasdaq down 4.0%
  • WTI crude oil up $1.74 at $117.05
  • CHF leads, USD lags

The starting point for trying to understand what happened today in the US dollar is here.

It was a crazy day and played out very similarly – almost eerily – to May’s FOMC decision. There was no dip in the stock slide, even with yields falling from much higher to much lower over the course of the day.

Markets are absolutely nervous ahead of the Bank of Japan’s decision later today and there is no appetite to stand ahead of the train of risky goods ahead of the US holiday on Monday. In Europe, a leak from the ECB suggesting it will sell core bonds to buy the periphery and close spreads in this way has prompted a rethink on this point and EUR/USD shorts.

The biggest move was the pound, which is now 400 pips off this week’s lows. The Bank of England can hardly take credit for this decision, but it’s worth noting that there were three dissenters and a fair amount of backlash about only 25 bps hike.

The SNB’s decision came as a total shock and everyone is scratching their heads over what’s next. They removed the reference to the strong franc in the statement, but also appear to be intervening to prevent the franc from appreciating further. The franc very strong but not as strong as one might think given such a shocking decision.

At this point, everyone is basically short of anything and talk of a recession is rife. It’s a tough mentality to change, but bear market rallies can be powerful.


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