The United States dollar index or so-called the DXY was corrected to fall below the 100.00 threshold following a pullback in U.S. Treasury bond yields. The greenback is seen weakening.
That was particularly against the sterling and the euro. When this news was written in the last half of the Asian session on Thursday (14/April), USD / JPY also put the brakes on the bullish rally for a while.
That was below the threshold of 126.00. The US treasury bond yield for 10Y is now in the level of 2.684%. Some days before it has been close to the position of 2.800% In the market.
This situation then cut the America’s USD bullish to some other currencies. At the beginning of this week, Ray Atrrill as the global FX head of strategy in the National Bank of Australia said something.
He explained that everything will follow the continued increase in the USA tied, falling down equity, raising dollar, and now because of what is happened to the US treasury, everything is reversed.
Pound Sterling made the Sharpest Rebound
The pound sterling posted its sharpest rebound versus the US dollar yesterday. The GBP/USD rate jumped from the range of 1.2970s to more than 1.3100, after the release of UK inflation data.
It was featuring figures much higher than the consensus estimates. There is a possibility that the Bank of England or BOE will increase the interest rate again next month although some analysts worry about that.
Their concern is about the effect of a streak rate hike to the household financial condition and the UK economic growth. The USD/CAD also slumped since the new York session.
The cause was a statement that the Bank of Canada or BOC will increase the interest Rate. They rose it for about 50 basis point from 0.5% to 1.0% as the market’s expectation.
A Signal of the More Aggressive Rate Hike
What BOC was done is also a signal that the Rate hike can be more aggressive in the future. Yesterday, the market participants were waiting for an announcement the ECB meeting result.
It is especially to check whether they will have the same hawkish action just like the other central banks companions did. For an information, ECB is facing a quite unique Stagflation risk.
That is because the inflation speed was rocketing and economic situation may be slowing down as an impact of the Russia – Ukraine war. In yesterday policy meeting, the RBNZ confirmed last month's forecast of a potential rate hike.
It can be more than 3 percent by the end of next year. That action is needed because inflation expectations remain high. However, the market has been taking that into account since last month's RBNZ meeting.
The RBNZ's move seems to simply change the rate hike from "installment" to "lump sum" in the short term. In fact, ahead of today's meeting, market participants have even begun to take into account inflation expectations for a longer time frame.
The Financial Market has Supported the OCR peak Calculation
Although the RBNZ's decision is in line with current market calculations, it emphasizes the important differences in OCR's outlook over the long term. It was said by Michael Gordon, a Westpac economist.
In recent weeks, the financial markets have pushed OCR's higher peak calculations for this cycle (through the end of next year). It now stands at 4%.
Instead, the RBNZ views today's decision as a 'solve the problem sooner rather than later' approach. So far, It's like a dovish 50 basis point rate hike where they just advancing the increase.
The RBNZ hasn't really changed its view of the February statement on OCR's outlook. Meanwhile, Other comdoll peers performed relatively better.
The AUD/USD is stable in the range of 0.7450s; Maintaining it’s positions near the multi-month highs despite a weakening streak over the past week.
