Pelosi rocks the boat – Action Forex | Omd Cialis

markets

Pelosi rocks the boat. The Speaker of the House of Representatives is about to set foot on Taiwanese soil to meet the president (tomorrow) and it is much against the will of China. Taiwan is a self-governing island, but China considers it part of its territory. High level meetings like this are seen as a supporter of Taiwan independence and interference in internal affairs. China repeatedly warned the US not to make the same mistake it made 25 years ago by sending then-spokesman Newt Gingrich on a similar visit. China threatened “catastrophic consequences” without specifying what those measures might be. Meanwhile, it has ramped up military activity in Taiwan, while the Taiwan President’s website came under cyberattacks this afternoon. The geopolitical saga took on a different aspect after Russia sided with its southern neighbor, which Pelosi’s trip called provocative. It keeps the markets busy. European and US stocks fall 0.5% to 1%. Both US government bonds and German Bunds rose safe haven flows but the tide turned for the better as US traders began to follow suit. US yields pared losses hitting as much as 5 basis points and is now trading 1.8 to 7.9 basis points higher in flattening. The trend reversal is also helping the 2.55% support survive in the 10-year yield. German yields fell nearly 8 basis points but bottomed in tandem with the US. Current movements vary from +2 bps (5 years) to flat (30 years). Again, a key previously tested benchmark (0.73% for the 10-year yield) survives the day. EMU swap rates reverse 5.1bps losses into gains of 1.7-5.2bps in a fairly sharp move. Despite the sudden reversal later in the day, short-term money markets are increasingly doubting the ECB’s tightening intentions. The final rate expected today is less than half (<1.25% in early 2023) of what was expected at the top of market prices in mid-June. It's unclear to us how this can ever be reconciled with the ECB's own inflation expectations of an average of 3.5% above target next year, but it's happening anyway.

Two noticeable developments in today’s forex markets. Australian dollar lags behind G10 peers after a third straight rate hike of 50 basis points by the RBA. It is the central bank’s slight shift towards a greater focus on growth that has led to a significant repricing of yields and therefore the Australian currency. AUD/USD falls from 0.703 to 0.693. The Japanese yen marks the other end of the spectrum, which are benefiting from falling core bond yields. USD/JPY support at 131.25 has been tested but is just surviving at the time of writing. EURJPY extends free fall to 134. The dollar was a little hesitant at first, not even able to benefit from risk aversion like yesterday, but then picked up momentum. EUR/USD slides back into the low and very familiar 1.02 range. The trade-weighted index bounced off the 105 (105.6) support zone. EURGBP is on course for its weakest close since April as Sterling remains notably resilient.

newspaper headlines

House prices in the UK rose at their slowest pace in a year in July. The Nationwide Building Society price indicator was up 0.1%m/m (est. 0.2%) and up 11% year-on-year (est. 11.4%). The housing market has boomed during the pandemic and values ​​continue to be supported by supply constraints and very low unemployment, leading to their longest winning streak in 8 years, NBS said. However, sRising inflation and rising mortgage rates are beginning to make themselves felt. NBS chief economist Gardner expects the slowdown to continue as inflation could hit double digits towards the end of the year. In addition, the Bank of England is set to make its biggest rate hike in 27 years on Thursday. Both of these elements, which are dampening price growth in the housing market, are also having an impact on UK business life. The number of companies that filed for bankruptcy in the most recent quarter rose 81% from the year-ago period as many of the government’s support measures ended over the past year. It was the highest number since 2009said the UK Insolvency Service. The majority of them were Creditor Voluntary Liquidations (CVLs), ie. when business leaders themselves decide to liquidate an insolvent business. But CVLs are often seen as the first wave of bankruptciesso things can get worse before they get better.

Leave a Comment