The euro surged as Germany’s coalition talks improve and ECB minutes show a hawkish tilt.
Scott Petruska, CFA |
January 12, 2018
The euro hit three-year highs following news of Chancellor Angela Merkel and Germany’s SPD party reaching a preliminary accord to negotiate a coalition government, and minutes of the ECB’s December meeting showing policymakers ponder a hawkish shift.
“Life is 10% what happens to you and 90% how you react to it.” Charles R. Swindoll
January 12, 2018
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The dollar headed for its worst weekly performance in nearly four months, despite US 2-yr Treasury yields touching 2% for first time since the financial crisis and inflation figures slightly higher than expected.
The UK pound showed strong gains after rumors that Spanish and Dutch finance ministers have agreed to jointly push for a soft BREXIT deal. The pound approached $1.37, its highest level versus the dollar since the UK voted to exit in EU in June 2016.
The euro gained for the third consecutive day. News of progress in Germany in forming a coalition government and release of minutes of December’s ECB meeting showing that members are open to aligning monetary policy with a strengthening economy bolstered the euro.
The Canadian dollar remains on its back foot after yesterday’s market chatter about increased likelihood that Trump’s administration will pull out of NAFTA. Odds of a BOC rate hike on Jan-17th quickly dropped from 87% to 71%, although it’s back up to 85% this morning.
The Australian and New Zealand dollars dropped slightly overnight on profit-taking after initially hitting four-month highs earlier in the morning. The negative NAFTA trade-related chatter affected the currencies of export-led economies more so than others.
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|Source: Bloomberg 2017|
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About the Author
Scott Petruska is a senior advisor for Silicon Valley Banks’ global financial services group, and is based in Boston, MA. He advises clients on currency and interest rate hedging strategies and helps them with other aspects of global banking. He regularly writes blogs on topics covering the global financial markets, conducts client seminars and webinars, and speaks at regional financial conferences.
Petruska has over 30 years experience in the currency and interest rate markets, and has lived and worked in Boston, Chicago, New York City, Singapore and Tokyo. Prior to joining SVB in 2009, he worked at several large international financial institutions, including National Westminster Bank, Irving Trust, Bank of New York, State Street Bank and Commerce Bank. He has been an institutional trader, product developer, analyst, salesperson and advisor.
Petruska has been awarded several professional designations, including the CFA (Chartered Financial Analyst), FRM (Financial Risk Manager) and CMT (Certified Market Technician). He earned his undergraduate degree in Finance & Banking from the University of Wisconsin.
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