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Pound Tumbles After BoE Keep Rates Steady Amid Rising US Treasury Yields

The Sterling pound fell against the dollar following the Bank of England’s dovish interest rate decision despite a unanimous decision to maintain the current rates. The GBP/USD currency pair’s decline was also fueled by the rising US Treasury…

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The Sterling pound fell against the dollar following the Bank of England’s dovish interest rate decision despite a unanimous decision to maintain the current rates. The GBP/USD currency pair’s decline was also fueled by the rising US Treasury yields, which boosted the dollar at the pound’s expense. The pair later recouped some losses.

The GBP/USD currency pair fell from a high of 1.4001 in the early London market to a low of 1.3897 in the early American market but had recouped some of its losses at the time of writing.

The currency pair initially traded sideways, alternating between gains and losses amid rising US Treasury yields. The pound could not maintain yesterday’s rally against the dollar after yesterday’s dovish FOMC rate decision that pushed the next rate hike to 2024. The pair fell after the Bank of England released its monetary policy statement. The bank’s Monetary Policy Committee voted unanimously to keep interest rates at 0.1% and the asset purchase facility at £895 billion. The BoE Chief Economist Andy Haldane said that he expects the UK to have a rapid economic recovery, yet this had a muted impact on the pair.

The release of the downbeat US weekly initial jobless claims report by the Department of Labor allowed the cable to recoup some of its losses. News of the record number of COVID-19 vaccines administered in the UK on Wednesday also boosted the cable.

The currency pair’s future performance is likely to be affected by tomorrow’s UK public sector borrowing report and US dollar dynamics.

The GBP/USD currency pair was trading at 1.3934 at 18:22 GMT, having fallen from a high of 1.4001. The GBP/JPY currency pair was trading at 151.86 after dropping from a high of 152.55.


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Author: Simon Mugo

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Economics

US Close: Powell’s Mic Check, Taper Confirmed, Oh Snap, Earnings, Flash PMIs

US stocks declined from record highs after Fed Chair Powell signaled they are on track to taper but refrained from giving any signs about interest rate…

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US stocks declined from record highs after Fed Chair Powell signaled they are on track to taper but refrained from giving any signs about interest rate hikes.  Powell did not deliver a clear message at first, as audio issues made it difficult to hear him say that substantial progress in the labor market recovery was made and that they are ready to taper.  The US economy still needs to fill 5 million jobs before the labor market recovery is back to 2020 levels, which should suggest immediate rate hikes after tapering is done might be a bit too aggressive. 

The Fed Chair noted that the uneven recovery will eventually see job growth to return to the high levels seen in the summer.  Bottleneck and supply chain issues will continue to keep pressuring prices in the short-term, and that them will probably last a lot longer than the Fed wants. Powell is still holding onto the belief that inflation will eventual abate late next year. If inflation does end up being persistent the Fed will use their tools. 

The key takeaway from Powell was that the Fed is on track to begin tapering and that should be done by mid-2022, transitory inflation might last a little longer than expected, and that rate hike expectations should be written in pencil. 

A busy Friday

Wall Street settled lower as Fed Chair Powell prepared markets for a November taper announcement and that rate hikes will happen if they are wrong about inflation being transitory.  Some traders used Powell’s comments to lock in profits, but overall still remain optimistic following today’s mixed earnings, relieft that Evergrande made a crucial payment, and as US service sector activity bounces back. 

Earnings

Supply chain issues were the primary catalyst for poor earnings and cautious outlooks from Intel, Snap, Beyond Meat, and Chipotle US stocks refuse to break.  There were some strong results from American Express, Regions Financial, and energy stocks continue to benefit from rising crude prices. 

Social media platforms and companies dependent on advertising revenue are declining as supply chain issues have some companies pulling back ad spending.  Snap stated that global supply chain issues and labor shortages are impacting their partners and that probably will remain the case throughout the holidays, which could really take away from what should be their strongest quarter. 

US Data

The flash PMIs in the US provided optimism that the economy is still on sound footing.  This month, the service sector rebounded.  Despite the slowdown in economic activity that is being seen across the globe, both the US manufacturing and service sectors have activity in the high-50s.  IHS Markit noted that the economy accelerates despite bottlenecks as services revive from the Delta wave, but prices rise at record pace.  Everything from the flash PMIs matches up with everything we are hearing this earnings season, which should have investors getting more nervous that inflation may end up being persistent. 



Author: Ed Moya

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Economics

Commodities and Cryptos: Oil extends gains as rig count dips, Gold volatile, Bitcoin exhaustion

Oil Crude prices only have one way to go after US and European flash Manufacturing PMI data show activity still remains strongly in expansion territory. …

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Oil

Crude prices only have one way to go after US and European flash Manufacturing PMI data show activity still remains strongly in expansion territory.  Last night, President Biden prepared Americans to expect to be paying over $3 a gallon.  Biden noted that if the US taps the Strategic Petroleum Reserves, that will only help Americans by 18 cents a gallon. 

WTI extended gains after the weekly Baker Hughes crude oil rig count declined by two rigs.  US production was ramping up post-hurricane IDA but now seems to have plateaued.  

WTI crude has strong resistance from the $84 level, but that might not hold next week.  Both supply and demand side drivers remain mostly bullish and unless the north gets warmer weather forecasts, $90 oil seems inevitable.  

Gold

Gold was having a nice Friday after another round of earnings made some investors boost their inflation hedges, safe-haven demand improved as Europe and Asia are still battling COVID, and as easing fears over China’s property sent the dollar lower.

Fed Chair Powell ended bullion’s strong finish after signaling they are ready to start tapering.  The removal of stimulus and the signal that rate hikes will likely be determined if inflation runs wild into the summer was the main driver that sent gold sharply lower. The front end of US rates dropped hard post Powell and that had gold drop over $30 before stabilizing close to the $1800 level. Gold will finish the week higher as it is starting to look attractive again for some investors.  Wall Street knows that negative real yields will remain well into next year and that that gold will reassert itself as an inflation hedge. 

Bitcoin

Bitcoin continues to drift away from record highs as exhaustion signs set in.  Bitcoin’s second future ETF disappointed as it provided an unwelcome dip on its first day of trade.  Both Valkyrie Bitcoin Strategy ETF and the ProShares Bitcoin ETF are trading below their trading debut levels. 

A healthy consolidation should be welcome news for Bitcoin bulls, but a break below $60,000 might unnerve some short-term traders.  Bitcoin won’t make a run towards the $70,000 level, until the next wave of Wall Street buys actual Bitcoin and not just this new wave of products.





Author: Ed Moya

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Economics

5 Articles On the Housing Bubble In U.S. and Worldwide

Many articles are published every day on the housing bubble in the U.S., Canada and around the world so here are 5 such articles you might have missed…

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Many articles are published every day on the housing bubble in the U.S., Canada and around the world so here are 5 such articles you might have missed that are well worth your time to read. 

1. IMF Warns Of Significant Downside In Home Prices Worldwide

Global home prices are rising, but not to the same extent everywhere. Canada and Germany’s home prices made much sharper gains than other G7 countries

Saying Canadian home prices are frothy, is like saying Mozart had a little musical talent. Residential real estate prices in Canada are growing at the fastest rates in the G7 and not just over the past year, but over the past 3 decades, Nothing in the G7 comes even close to this rate of price growth.

 

3. Revealing Insights Into Current American & Canadian House Pricing Trends

High flying home prices may be getting close to pushing their limits as last month home sales also saw a sharp decline in volume, partially attributed to prices.

Bloomberg Economics says the run-up in global real estate prices over the last year has produced a warning signal unlike any other, not seen since right before the 2008 financial crisis.

 

The house price-to-rent ratio shows Canadian real estate is drastically overvalued making the U.S. real estate bubble back in 2006 look like a sleepy backwater market of value investors.

The post 5 Articles On the Housing Bubble In U.S. and Worldwide appeared first on munKNEE.com.


Author: Lorimer Wilson

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