Connect with us
  • tg

Forex

Sterling slips as BoE holds rates, Swiss franc tumbles after surprise SNB cut

letizo News

Published

on

2/2
Sterling slips as BoE holds rates, Swiss franc tumbles after surprise SNB cut
© Reuters. FILE PHOTO: Woman holds U.S. dollar banknotes in this illustration taken May 30, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

2/2

By Joice Alves

LONDON (Reuters) -Sterling fell after the Bank of England (BoE) on Thursday kept its benchmark interest rate on hold as expected, while the Swiss franc fell to a multi-month low after the Swiss National Bank (SNB) surprised markets by cutting interest rates.

The BoE’s interest rate-setters voted 8-1 to keep borrowing costs at their 16-year high of 5.25% as the two officials who had previously called for higher rates changed their stance.

Governor Andrew Bailey said there had been “further encouraging signs that inflation is coming down” but he also said the BoE needed more certainty that price pressures in the economy were fully under control.

Sterling was last 0.3% lower on the day at $1.2742. Against the euro, it fell 0.23% to 85.62 pence, after hitting an almost three-week low.

“None of the nine MPC (Monetary Policy Committee) members opted for a hike this time around, compared with two last time. Markets took the news as dovish, with Gilts rallying and the pound weaker,” said Matthew Landon, Global Market Strategist at J.P. Morgan Private Bank.

“Still, the BoE looks more likely to be in the ‘late cutter’ camp. Even with recent progress that we have seen on price pressures, the UK still looks to be a couple of steps behind the rest of the world on their inflation battle.”

The BoE’s decision came a day after data showed inflation fell to its lowest level in almost two-and-a-half years – even if it remains higher than the bank wants.

Elsewhere, the Swiss franc fell sharply against the dollar and sank to its weakest point since last July against the euro, after the Swiss National Bank (SNB) unexpectedly cut rates.

The euro climbed against the Swiss franc to 0.978, the most since July 2023. It was last up 0.75% to 0.975. Against the dollar, the Swiss franc fell 0.84% to 0.8943, after briefly hitting its lowest since November.

The SNB cut its main interest rate by 25 basis points to 1.50%, a surprise move which made it the first major central bank to dial back tighter monetary policy aimed at tackling inflation.

A majority of analysts polled by Reuters had expected the SNB to keep rates on hold. It was the bank’s first rate cut in nine years.

“It’s the first central bank in the developed world to ease, so that shows the direction where the others are going,” said Jan Von Gerich, chief analyst at Nordea.

“The SNB was always the first likely mover, so this shouldn’t have an impact on what the others will do… But from the markets’ point of view, this does open the door to what could happen elsewhere,” he added.

The Norwegian crown steadied against the dollar, after Norges Bank kept its rate unchanged, as expected.

The crown was 0.1% higher to 10.5480.

The Turkish lira rallied 0.8% to 32.13 against the dollar after weeks of steady declines, as Turkey’s central bank unexpectedly raised its key interest rate by 500 basis points to 50% on Thursday, citing a deteriorating inflation outlook and pledging to keep a tight stance until there is a significant and sustained drop in the trend.

The yen steadied against a strengthening dollar as it drew some support from expectations of further rate hikes from the Bank of Japan later this year and some jawboning efforts from Japanese government officials.

The yen was last 0.1% higher on the day at 151.11, after rallying in Asian trading hours and reversing some of its heavy losses in the wake of this week’s BOJ policy shift.

The rose 0.28% to 103.51 after falling almost 0.5% on Wednesday.

In a week packed with central banks meetings, the Federal Reserve on Wednesday maintained its projections for interest rate cuts for the year in the face of upside surprises on inflation, and did not strike a more hawkish tone as some investors had feared.

Forex

Dollar flat ahead of key inflation release; Middle East tensions ease

letizo News

Published

on

Investing.com – The U.S. dollar traded largely unchanged in calm trading Monday, amid a calming of tensions in the Middle East and ahead of the release of the Federal Reserve’s favorite gauge of inflation later in the week.

At 05:40 ET (09:40 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded flat at 106.005, retreating from the five-month peak of 106.51 seen last week. 

Dollar stable ahead of key inflation release

The dollar surged to new highs last week after Israel launched a missile attack on Iran, in an escalation of the conflict in the volatile Middle East.

However, tensions appear to have been cooled, with Tehran downplaying Israel’s retaliatory drone strike against Iran, in what appeared to be a move aimed at averting a regional war.

“Sentiment is generally supported across asset classes as the week starts,” said analysts at ING, in a note. “All interested parties appear to have chosen the path of downplaying the size and consequences of Friday’s Israeli strikes in Iran.”

That said, the dollar has also been supported by strong U.S. economic data and persistent inflation, coupled with a slew of hawkish comments from Fed officials, reducing the chances of the Federal Reserve cutting rates any time soon. 

These officials will be keeping quiet this week, ahead of next week’s , but activity is likely to be limited ahead of Friday’s look at the , the Federal Reserve’s favored inflation gauge, which economists expect to remain elevated in March.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or
remove ads
.

Other economic data for the week includes an initial estimate of first quarter , which is expected to have moderated slightly from the previous quarter. Data on and will also be released along with revised figures on consumer sentiment and inflation expectations.

Euro edges up, but ECB set to cut early

In Europe, rose 0.1% to 1.0656, trading near six-month lows with regional economic weakness set to result in the European Central Bank cutting interest rates before the Federal Reserve.

Elevated tensions in the Middle East are unlikely to drive up energy prices and should not affect the European Central Bank’s plans to start cutting interest rates in June, French central bank chief Francois Villeroy de Galhau said on Sunday.

“Barring surprises, there is no need to wait much longer”, Villeroy told business daily Les Echos in an interview. “At the moment, the conflict is not leading to a marked rise in oil prices. If this were ever the case, we would have to analyse monetary policy for whether this shock is temporary and limited, or whether it is transmitted – beyond commodities – to underlying inflation.”

climbed 0.1% lower to 1.2355, just above its lowest level since mid-November seen on Friday, after Bank of England Governor Andrew Bailey and Deputy Governor Dave Ramsden alluded last week to Britain’s inflation slowing as expected. 

“Sterling markets moved on Friday after the Bank of England’s deputy governor, Dave Ramsden, sounded less concerned about price pressures and suggested that there were indications of UK inflation converging to that of the eurozone,” ING said. “Crucially, he added that the Bank will be “responsive” as evidence on inflation accumulates.”

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or
remove ads
.

Yen weak ahead of BOJ meeting

In Asia, traded 0.1% higher at 154.74, remaining well above the 154 level and near 34-year highs, keeping investors on guard over any potential government intervention. 

Focus this week is on a Bank of Japan rate decision on Friday – the central bank’s first meeting after a historic rate hike in March. Any cues on future rate hikes and policy changes will be closely watched.

edged 0.1% higher to 7.2437, after the People’s Bank of China kept its benchmark on hold, as expected. 

The LPR was kept at record lows, as the PBOC moved to keep monetary policy as loose as possible to buoy economic growth. However, low interest rates are also expected to keep the yuan under pressure. 

The USDCNY pair was close to a five-month high, above the psychologically important 7.2 level. 

 

Continue Reading

Forex

UBS raises USDCNY forecast amid geopolitical tensions

letizo News

Published

on

On Monday, UBS revised its forecast for the exchange rate, citing increasing geopolitical tensions and expectations of fewer rate cuts by the Federal Reserve. The Swiss financial services firm now anticipates the USD/CNY rate to reach 7.35 by June, up from the previous target of 7.20. Similarly, the September target has been adjusted to 7.30 from 7.15, the December target to 7.25 from 7.15, and the March 2025 target to 7.20 from 7.15.

UBS suggests that the People’s Bank of China (PBoC) is showing a greater willingness to allow a weaker yuan, which could contribute to additional short-term pressure on the Chinese currency. The firm’s analysis points to the rising geopolitical tensions as a key factor influencing the yuan’s trajectory.

Despite the potential for a pivot by the Federal Reserve in September, which might typically ease the upward trend of the USD/CNY, UBS believes that the impact could be mitigated. The firm notes that market concerns about US-China trade tensions, especially in the lead-up to the US presidential election in November, could dampen the effects of any policy changes by the Fed.

UBS’s revised targets reflect a cautious outlook on the Chinese yuan, as the global financial market continues to weigh various geopolitical and economic factors. The firm’s adjustment of the USD/CNY targets highlights the complex interplay between central bank policies, international relations, and market sentiment.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Continue Reading

Forex

Asia FX weak as rate fears keep dollar steady

letizo News

Published

on

Investing.com– Most Asian currencies moved in a flat-to-low range on Monday, and were nursing steep losses from the past week as concerns over higher-for-longer interest rates kept traders largely biased towards the dollar.

Still, easing fears over a bigger conflict in the Middle East offered regional currencies some relief, as risk appetite improved. 

But most regional units still retained a bulk of their losses from over the past week, as traders steadily priced out expectations that the Federal Reserve will cut interest rates by as soon as June.

Dollar steady, more rate cues awaited this week 

The and both fell slightly in Asian trade on Monday, but remained close to over five-month highs hit earlier in April. 

Waning bets on a June rate cut boosted the dollar, especially after strong U.S. inflation readings and hawkish commentary from top Fed officials. 

Focus this week is on more cues on U.S. monetary policy, specifically from data- which is the Fed’s preferred inflation gauge. The reading is due on Friday and is expected to reiterate that U.S. inflation remained sticky in March.

More cues on the U.S. economy are also due this week, with data for April set to offer more insight into business activity.

Chinese yuan steady after PBOC holds loan prime rate 

The Chinese yuan’s pair moved little on Monday after the People’s Bank of China kept its benchmark on hold, as expected. 

The LPR was kept at record lows, as the PBOC moved to keep monetary policy as loose as possible to buoy economic growth. The central bank is also expected to further trim the rate this year, after a cut to the in February. 

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or
remove ads
.

But low interest rates are also expected to keep the yuan under pressure. The USDCNY pair was close to a five-month high, above the psychologically important 7.2 level. 

Japanese yen flat, BOJ meeting awaited 

The Japanese yen’s pair moved little on Monday, but remained well above the 154 level amid little relief from the dollar.

This kept investors on guard over any potential government intervention, especially as the USDJPY pair tested 34-year highs at 155. 

Focus this week is on a on Friday- the central bank’s first meeting after a historic rate hike in March. Any cues on future rate hikes and policy changes will be closely watched.

Broader Asian currencies moved little as fears of higher-for-longer U.S. rates remained in play. 

The Australian dollar’s pair rose 0.3% after tumbling to a five-month low last week.

The South Korean won’s pair rose 0.5%, while the Singapore dollar’s pair was flat.

The Indian rupee’s pair rose 0.1%, but was trading below record highs hit last week.

Continue Reading

Trending

©2021-2024 Letizo All Rights Reserved