The financial markets are gradually convincing themselves that the Federal Reserve is certain to raise interest rates at its December 14 meeting. That, along with the continued retreat in the pound on remarks from U.K. Prime Minister Theresa May signaling a hard Brexit, sent the U.S. dollar to its biggest gain in two weeks. The Bloomberg Dollar Spot Index climbed by 0.6% this morning.
No cut in interest rates. No expansion or extension of asset purchases. No nothing from the governors of the European Central Bank at today’s meeting
Yesterday, financial markets fell as traders and investors decided that the policy changes–another 10 basis point cut to deposit rates and an increase of 10 billion euros a month in asset purchases–weren’t enough, especially in the face of lower forecasts for inflation and economic growth from the central bank. Today, financial markets seem to have decided that they’re reason to rally.
The longer the financial markets thought about the actions announced by the European Central Bank today, the less impressed markets were. The STOXX 600 Europe Index had climbed as much as 2.5% during the day, but after peaking around 1 p.m., the index finished down 1.7% for the day.
After being disappointed in December when the European Central Bank delivered only the minim expected, financial markets are going into tomorrow, March 10, positioned for another disappointment from Mario Draghi and the EuroZone central bank.
In anticipation of a weaker yen and central bank intervention, bad news on the Japanese economy produced a huge rally in Tokyo with the Nikkei 225 index soaring 7.16% on Monday.
Traders sold the U.S. dollar, and U.S. and EuroZone stocks on the new from the European Central Bank of a smaller than hoped for package to stimulate growth and inflation in the EuroZone and to weaken the euro
I think that in for the next six to nine months volatility will increase for China’s currency and that the possibility of another yuan devaluation needs to be taken seriously as a market risk
