Yields on core European bonds went for a slide yesterday as prices rose in response to the ECB's decision to leave its QE programme unchanged – for now at least. Elsewhere, the USD continues to make gains on its peers.
Article / 12 September 2016 at 22:07 GMT

US Market Wrap: A dove flew out of the cuckoo nest

FX Consultant / IFXA Ltd

  • Australia: NAB Business Conditions August                           2130 GMT 

US Data released:

  • Nothing of note 

New York traders walked into a risk-averse market. The US dollar and the Japanese yen were higher, oil prices were lower and global equity indices were in the red. And then someone let the doves out.  

Actually it was only one dove, but Federal Reserve Governor Lael Brainard delivered a pretty convincing argument as to why US rates should remain low, citing inflation undershoot, labour market slack and risks from foreign markets.

Suddenly it was “risk-on”. EURUSD popped to 1.1264 from 1.1215, USDJPY bounced to 101.85 from 101.50 and the GBPUSD rally accelerated. The commodity currency bloc also got into the act and posted gains.

The retreat in the US dollar helped oil prices rise. WTI jumped to $46.51 from $44.72, which may have also been the result of a bit of short squeeze. Traders appear to have ignored a new Opec forecast of higher non-member production and lower global demand in 2017.

US equity market indices were deep in the red prior to Brainard’s comments. The sellers became buyers and the indices closed with strong gains.


Russia's equity markets may be ripe for a correction, according to TradingFloor contributor Nadia Kazakova in her article: Why shorting Russian equities makes sense

 The retreat in the US dollar helped oil prices rise. Photo: iStock

– Edited by Susan McDonald

Michael O'Neill is an FX consultant at IFXA Ltd. Follow Mike or post your comment below to
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