USD: NFP to keep early Fed tightening expectations in play We mentioned this earlier in the week, but it seems the US Treasury yield curve sums up the global environment pretty well. As usual, the long end of the bond market is taking the strain from the uncertainty around Omicron. US 10 year yields are 23bps off their recent highs. But Fed Chair Jay Powell’s comments earlier this week that inflation is effectively no longer transitory has seen the policy-sensitive US two year yield stay firm above 0.60% (now just ...

Most central European currencies are set to strengthen in the next year, guided by economic recovery and interest rate hikes, although the Hungarian forint and Polish zloty’s gains will be tamer than previously expected, a Reuters poll showed. The poll forecast a 1.8% rise for the Czech crown EURCZK=, to 25.00 to the euro, over the next 12 months, and saw a 1.8% gain for the zloty and a 1.7% rise for the forint versus Wednesday’s closing levels. While the zloty and forint forecasts were not as high as in ...

China’s foreign exchange regulator on Friday issued guidelines on foreign exchange trading, targeting market manipulation, fraud and abuses. The guidelines will help regulate foreign exchange market trading and promote its healthy development, the State Administration of Foreign Exchange said. Source: Reuters (Reporting by Kevin Yao and Beijing newsroom; Editing by Toby Chopra)

Interest rate differentials will dominate sentiment in forex markets over the next three months, a Reuters poll of FX analysts found, placing the U.S. dollar in a unique position to extend its outperformance against its peers. The dollar index, up nearly 7% for the year and on its best run since 2015, received further impetus from Federal Reserve Chair Jerome Powell on Wednesday, who gave markets fodder to speculate the central bank would raise rates earlier than expected. With that policy impetus in its sails, the dollar is likely to ...

Here’s why it matters Why do central bank digital currencies, CBDCs, matter? Well, central bankers and policymakers cite a variety of reasons. The importance attached to those also varies considerably between countries. Among the most prominent are: • the declining use of banknotes and coins, necessitating authorities to look at digital alternatives; • the need to maintain “monetary sovereignty” in the face of privately issued, non-domestic currency-denominated “stablecoins”; • improving financial inclusion; • supporting the international role of the domestic currency in a geopolitical context. The focus of most projects ...

The dollar gained on Friday against most major currencies as traders positioned ahead of key U.S. jobs data that could clear the path for an earlier rate hike by the Federal Reserve. Fed officials speaking on Thursday joined Chair Jerome Powell in striking a hawkish stance, with San Francisco Fed President Mary Daly saying it may be time to “start crafting a plan” to raise rates to combat inflation, and Richmond Fed President Thomas Barkin throwing his support behind “normalising policy.” At the same time, the continued spread of the ...

Investors became increasingly bearish on most Asian currencies as the detection of a possibly vaccine-resistant coronavirus variant and subsequent mobility restrictions by several countries soured risk appetite, a Reuters poll showed on Thursday. Bullish bets on the Indonesian rupiah and Malaysian ringgit reversed, while short positions on the Thai baht, Singaporean dollar and South Korean won rose, a poll of 10 respondents found. Long bets on the yuan, however, consolidated and were at their highest since early June, as strong corporate demand for the Chinese currency saw it gain against ...

USD: In need of more good data Yesterday’s session was dominated by the news that the Omicron variant was found in the US. A quite predictable development, but one that likely contributed to keeping equity volatility elevated. In FX, the dollar oscillated and ultimately trended higher, with pro-cyclical currencies staying on the backfoot. Commodity currencies are set to face a key challenge today as OPEC+ members meet to decide on whether to go ahead with a planned output hike in January. Markets appear widely positioned for a delay in the ...

Currency markets steadied on Thursday as investors waited for clues on the threat posed by the Omicron coronavirus variant and the speed at which the U.S. Federal Reserve will taper stimulus. The dollar edged lower against most rival currencies, while the cautious mood was reflected by equity markets in Europe falling in morning trade. The United States recorded its first case of the Omicron variant on Wednesday, weighing on markets. The United States and Germany joined countries around the globe planning stricter COVID-19 restrictions on Thursday. “It seems like the ...

Currency markets steadied on Thursday as investors waited for clues on the threat posed by the Omicron coronavirus variant and the speed at which the Federal Reserve will taper stimulus in the United States. The dollar barely budged against most rival currencies on a further risk-off day for markets broadly, with jittery equity markets in Europe opening lower. The first case of the Omicron variant was identified in the United States on Wednesday, weighing on markets, although much remains unknown about the new strain. “It seems like the market is ...

USD: Powell rocks markets G7 FX volatility is on its highs for the year and it is not hard to see why. Over the last week news of the Omicron variant has inserted a new and, as yet, unsized risk premium into global asset markets. Yet yesterday, investors read a clean set of hawkish headlines from Fed Chair Powell, including remarks that it was time to retire inflation’s description as transitory and that it may be appropriate to conclude tapering a few months earlier. The US yield curve took its ...

The dollar edged up on Wednesday as euro-dollar volatility hit the highest level of the year in response to worries about the Omicron variant, while the dollar found support in renewed expectations for interest rates hikes. The dollar index rose 0.03% to 95.997 at 0920 GMT, after it registered its strongest month since June, despite volatility triggered by Omicron. Euro/dollar volatility levels have reached the highest level this year with the euro climbing to a two-week high on Tuesday, before losing ground as the dollar strengthened. “Realised one-month EUR/USD volatility ...

USD: Fed rate expectations under pressure The rebound in equities yesterday was relatively contained, and Asian equities (as well as Western stock futures) are back in the red this morning. This is clearly an indication that markets are awaiting some solid confirmation that the current vaccines offer enough protection against the Omicron variant before jumping back on risk-on trades. For now, the US administration is not running on the assumption that new vaccine formulas will be needed and is simply planning to roll out booster doses faster (like in most ...

The euro surged on Tuesday and is on track for its biggest three-day rising streak this year as traders cut their short positions on the single currency after Moderna (NASDAQ:MRNA)’s CEO said COVID-19 vaccines are unlikely to be as effective against the Omicron variant as they have been with other types. Risk appetite took a battering across all markets for a second day in less than a week after his comments reinforced expectations that the global economy is set for a rocky and longer return to normalcy path in the ...

USD: Dollar correction could have been worse Having continued in their steady ascent from their lows in March 2020, risk assets landed on the Omicron ladder late last week, and on Friday the MSCI World equity index suffered its largest correction since last October. Fears over its severity have been marginally allayed by reports that the symptoms associated with Omicron are mild, yet it seems that we will have to wait a couple of weeks before we hear more definitive news on whether the current range of vaccines is effective, ...