Markets have priced a 25 bps hike from the BOE. Sterling bought US$1.2282 after rising as high as US$1.2334 overnight. The New Zealand dollar also gave up overnight gains, but was firm in morning trade at US$0.6238. The risk-sensitive Australian dollar recoiled sharply from a two-week high of US$0.6759 to be back at US$0.6707 on Thursday morning. "From the foreign exchange perspective, we think that argues for further dollar weakness as the ceiling for the Fed cycle has clearly come down."įinancial markets have been roiled by wavering confidence in banks globally following a run on Silicon Valley Bank two weeks ago and the sudden demise of Credit Suisse. The shift in tone from the Fed makes it less likely that markets return to worrying that strong economic data is going to lead to more and more rate hikes, said NatWest Markets head of G10 FX strategy Brian Daingerfield. Two-year Treasury yields fell 22 bps on Wednesday. Sterling also shot to a seven-week high as British inflation unexpectedly rose, leaving it at an eye-watering 10.4% and heaping pressure on the Bank of England to raise rates and sound hawkish at its meeting later in the day.ĭollar/yen fell 0.7% overnight and was edging lower in the Asian morning at 131.19. The euro strengthened as much as 1.3% to its highest since early February at US$1.0912, though by the Asian morning it had dropped back to bought US$1.0872. The dollar pared some of its losses when US Treasury Secretary Janet Yellen set off another round of bank stock selling and jitters over stability by telling Congress she hasn't considered or discussed blanket insurance for deposits. That's a contrast to Europe where markets see another 50 bps or so to go, and the gap sent the euro surging. The Fed raised its benchmark funds rate by 25 basis points (bps), as expected, but dropped language about "ongoing increases" being needed in favour of "some additional" rises, as it waits and watches how wobbling confidence in banks affects the economy.įutures imply only an even chance of one more hike. SINGAPORE (March 23): The dollar was under pressure near seven-week lows on Thursday as US bond yields fell sharply after the Federal Reserve sounded close to calling time on interest rate hikes.
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