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Euro rallies as traders prepare for central bank rate rises

The euro rose and the government debt of the eurozone came under pressure on Tuesday, when traders trained the bloc’s central bank to raise interest rates for the first time in more than a decade.

The common currency rose 0.8 percent to just over $ 1.02 after falling to dollar equality last week for the first time in 20 years, as the dollar strengthened and fears grew over Europe’s dependence on Russian energy.

In the government bond markets, the yield on two-year German policy-sensitive bonds rose by 0.08 percentage points to 0.59%. The yield on the German bond for 10 years, which is considered a proxy for the raising costs of the eurozone, rose by 0.03 percentage points to 1.25%. Bond yields rise as their prices fall.

The European Central Bank has widely signaled that on Thursday it will raise its principal deposit rate, currently to minus 0.5%, for the first time since 2011.

Markets on Tuesday morning considered the possibility of a particularly large interest rate hike of 0.5 percentage points. The ECB has kept its key interest rate at less than zero to stimulate lending and spending since 2014, when the eurozone faced a sovereign debt crisis, lagging behind the US Federal Reserve and the Bank of England in tightening monetary policy to fight rising consumerism. Prices.

Newswires on Tuesday reported that the ECB may consider raising credit costs this week by half a point, instead of 0.25 percentage points, amid fiery inflation.

“The fact is that the ECB is far behind the curve and they have a lot to do,” said Paul O’Connor, head of the UK multi-asset team at Janus Henderson. “So it would not look unusual if they started with a 50 basis point increase.”

The yield on two-year Italian bonds added 0.07 percentage points to 1.47%.

The Central Bank of the Eurozone may also offer new details on Thursday on a Designed support mechanism To protect weaker governments in the bloc, such as those of Italy and Greece, from higher rates.

In the stock markets, the European regional stock index Stoxx 600 fell 0.2%, after two days of gains after U.S. retail sales data pointed That the Fed’s interest rate hikes have not yet affected consumers’ willingness to spend.

Futures trading indicated that the Wall Street S&P 500 would rise 0.4% at the opening of New York after closing down 0.8% on Monday.

Global stocks fell about 20% this year as investors discussed the ability of central banks to tame rising inflation without pushing economies to contract, while the companies’ quarterly earnings season ignited concerns about a possible recession.

Wall Street banks JPMorgan and Morgan Stanley missed analysts’ earnings forecasts last week. On Monday, Goldman Sachs Warned that it would slow recruitment While Bloomberg reported that Apple is about to do the same.

“We’re going to see big downgrades to earnings forecasts and there is no support for monetary policy that will help markets, so it’s hard to be optimistic,” said Luca Paulini, chief strategist at Pictet Asset Management.

“The only thing that can save the situation is improvement in China.”

Up to 41 Chinese cities Are now under lock Or province-based controls, the Japanese bank Nomura said, as the nation pursues its zero-cube policy while racing to develop a homemade mRNA vaccine.

China’s economy expanded by only 0.4% in the quarter to June year-on-year, largely missing analysts’ forecasts, although weak performance has sparked speculation that Beijing will launch stimulus measures.

The Hong Kong Hong Kong Stock Exchange closed down 0.9%, raising its loss so far to 12%.

Topics in Tokyo rose 0.5%.

Euro rallies as traders prepare for central bank rate rises Source link Euro rallies as traders prepare for central bank rate rises

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