The euro hit a one-year high yesterday and German 10-year Bund yields continued to rise after doubling the previous day, as bets grew that the European Central Bank is readying to scale back its two-trillion-euro stimulus programme.
It was a lively European session. The bond market sell-off and jump in the euro came as a dive in technology stocks after the latest global cyber attack sent European shares to a two-month low.
The euro was eyeing up $1.14 and was at a seven-month high versus the pound though it hit the brakes after ECB sources said president Mario Draghi’s comments on tweaking the bank’s aggressive stimulus policy had been over-interpreted.
The common currency is now up almost 10 per cent this year.
The head of the Federal Reserve, Janet Yellen, and one of her lieutenants, Patrick Harker, said on Tuesday that they expected to continue raising US interest rates, but it couldn’t rally the dollar.
That provoked the banking world’s single biggest cheerleader for a stronger dollar, Deutsche Bank, to declare the end of the greenback’s bull run which dates back to 2014.
Amid all the choppiness, safe-haven gold rose for a sixth day in the last seven. Wall Street, meanwhile, looked set to struggle again after the S&P 500 and Dow Jones took their biggest tumbles in over a month.
The yield on US Benchmark 10-year Treasury notes last stood at 2.22 per cent, well up from Monday’s 2.14 per cent levels.
Wall Street’s drop on Tuesday saw it close at its lowest since May 31. It was spooked after the US Senate delayed voting on a healthcare reform bill, rekindling worries about the timeline of Donald Trump’s business-friendly policies.
The dollar index edged down 0.2 per cent to 96.227, well below its previous session high of 97.447.
Euro bulls pushed it up 0.5 per cent to a one-year high of $1.1373 with FX traders waiting for another flurry of ECB policymaker speeches at a conference hosted by the central bank in Portugal.
The greenback also slumped against the Canadian dollar after Bank of Canada Governor Stephen Poloz told CNBC that it looked like the central bank’s rate cuts have done their job.
Sterling, which has come under pressure again from Britain’s recently volatile politics, bounced too, clawing above $1.28 to its highest since Prime Minister Theresa May lost her parliamentary majority on June 8.
Conversely, it hit its weakest since November at 88.79 pence per euro.
Emerging markets were caught in the global stocks sell off and commodities were also on the move.
Crude oil futures gave back some of Tuesday’s near two per cent gain made on the back of the weaker dollar and expectations that US crude inventories might decline for a third consecutive week.
Brent crude futures were down 0.2 per cent at $46.55 per barrel. US crude futures were down 0.5 per cent at $44.04.