Sep 29, 2022 11:55AM ET
VOT Research Desk
Key Insights – U.S Morning Rundown
The Pound gained in volatile trading on Thursday as investors took comfort from the Bank of England’s purchase of long-dated bonds to stabilize the market and the U.S. dollar fell against some currencies.
The pound gained $1.1034 or 1.4%.Sterling has gained 6.4% against the dollar three days after hitting a new 37-year low of $1.0327.
The BoE’s actions played a part in the British pound’s recovery. The second day of a multi-billion pound program to stabilize the market saw the BoE purchase British government bonds with maturities of more than 20 years on Thursday for 1.415 billion pounds ($1.55 billion).
Brian Daingerfield, head of G10 FX strategy at NatWest Markets in Stamford, Connecticut, stated, “Sterling is outperforming and this is a follow-up from what we saw yesterday.”
“To stabilize markets, the Bank of England took a pretty decisive action. And the currency market is reacting favorably to that,” he continued.
As Prime Minister Liz Truss defended her government’s tax-cutting budget on Thursday, sterling initially fell.
On the other hand, a basket of major currencies saw the dollar fall. At 112.454, it was last down 0.1 percent.
To $0.9767, the euro gained 0.4 percent against the dollar.
According to data, consumers and businesses’ confidence in the economy of the euro zone decreased in September, leading to a sharper than anticipated drop in economic sentiment. Additionally, consumers and businesses are less optimistic about price trends in the coming months.
The main topic of discussion was German inflation, which soared to 10.9% this month, far exceeding expectations of 10%.As a result, the case for an additional 75 basis point increase at the next policy meeting of the European Central Bank is strengthened. This indicates that the figure for the wider 19-country eurozone, which is due on Friday, is also likely to exceed the anticipated 9.6%.
However, some analysts believe that the ECB’s potential action will likely only provide a temporary boost.
Rate increases can support a currency… But the process of inflation is never good for a currency, especially if inflation hasn’t been tamed properly by the central bank.”
“Just because the ECB is raising interest rates doesn’t mean I want to own the euro.”When it becomes clear that the eurozone is free of a massive recession and when it becomes clear that the bloc is clear of the U.S. dollar peak,” he added, “I would want to own the euro.”
The dollar gained 0.3% to 144.525 yen in other currency pairs.
Last week, Japan intervened to support the struggling yen on Thursday, Japan’s Finance Minister Shunichi Suzuki stated that speculative currency movements had caused market distortion, which was the purpose of the most recent currency intervention. If the rumors persisted, he indicated his readiness to intervene once more.
