Dollar Hits a Speed Bump - Investec
Research Team at Investec, suggests that the EU referendum is two weeks away today, but for once the stand out currency market move is not the Pound, but the Dollar.
“A soft jobs report, a non-committal speech from Fed chair Janet Yellen on Monday, and a looming UK referendum risk have seen chances of a Fed rate hike next week slashed. With that the US Dollar continues to soften across the board. G10 currencies have benefitted against the greenback, but higher yielding emerging market currencies have strengthened more, showing their higher sensitivity to US rate moves.
Additionally, with the market unwinding their expectations of Fed policy tightening, US stock markets continue to benefit - with the S&P 500 just 12pts short of its record high. One has to wonder whether investors have been caught by surprise on the stock move, meaning there may be more buying still to come. Gold prices have rallied to hedge against potential higher inflation from easier Fed policy expectations. Meanwhile oil prices have broken above the $50 a barrel level, with Brent trading at $52.6/bbl.
After London hours, the Reserve Bank of New Zealand held interest rates steady seeing the New Zealand Dollar spike a cent against the greenback. Commodity linked currencies continued to benefit while in the majors the Euro and Pound consolidated against the Dollar, with the single currency continuing to be a default beneficiary, that despite the ECB stepping up their QE program in recent months and now buying corporate bonds as well.”