Will the CPI Crash the USD?
The most impactful releases of this week will fill the market with volatility and sharp movements.
Evergreen buck goes down ahead of Fed minutes
Information is not investment advice
On Wednesday, the evergreen buck slumped versus the common currency and the UK pound because a dive in American Treasury gains diminished its attractiveness in the face of hopes for dovish news on interest rates from the major US bank.
Bond gains were pressured by economic data, which have clung to the weak side for the last time. For the last month the 10-year benchmark Treasury yield has gone down from 2.80% to 2.64% against the backdrop of uncertainty over how far the major US financial institution can afford tightening monetary policy.
Such uncertainty definitely makes Wednesday special, as traders are waiting for the publication of the minutes from the recent Fed gathering, where the major American financial institution opted for a more neutral as well as data-dependent stance, giving up its previous guidance about the probability of further interest rate lifts.
Investors are going to look for clues about how fast and how far the major US bank is about to have its balance sheet reduced. The Cleveland Fed President, Loretta Mester told that she appreciated the idea of ending the balance sheet wind-down in 2019 because such an outcome could potentially leave a considerable amount of crisis-era liquidity in the system, neutralizing any leap in market interest rates. Moreover, she added that official interest rates would most probably ascend rather than tumble.
Estimating the purchasing potential of the greenback versus a number of its main peers the USD index hit 96.333, slumping by 0.5% from its overnight maximum. The common currency was close to a one-week maximum at $1.1351 because German producer price inflation data for January turned out to be higher than anticipated.
Overnight the Chinese Yuan managed to ascend by about 0.5% versus the evergreen buck hitting 6.7227.
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