Risk-on mood after dovish ECB and easing trade tensions, UK pound rallies
Scott Petruska, CFA " | September 13, 2019
Investors shifted into a risk-on mood after the ECB’s dovish stimulus package and rumors circulating of a potential US-China trade compromise. The UK pound rallied nearly 1% to its highest level since July amid new hopes that a no-deal Brexit can be prevented. US and European stocks rose, bond yields are higher.
September 13, 2019
EUR/USD 1.1083 GBP/USD 1.2454 USD/CAD 1.3235 AUD/USD 0.6877 USD/JPY 108.09 USD/CNH 7.0418 USD/ILS 3.5331 USD/MXN 19.3860 USD/CHF 0.9876 USD/INR 70.9275
The US dollar index is lower by 0.35% overnight. Investors moved into risk-on mode following ECB President Draghi’s announcement of a hugely dovish monetary policy and with rumors circulating of a potential compromise in US-China trade negotiations.GBP
The UK pound rallied nearly 1% overnight, and has gained 4% versus the dollar over the last week. Short-term traders unwound short positions following a media report that Northern Ireland’s largest political party has agreed to accept some EU rules after a Brexit.EUR
Yesterday, the ECB revealed their monetary policy stimulus package, which met expectations -- they lowered the deposit rate by 0.10% to a record low of -0.50%; it would restart bond purchases at a rate of €20b a month; they will ease lending terms for eurozone banks; and, they offered banks tiered interest rates in order to ease pressure on lending margins. The euro moved higher amid a short-covering rally, EZ bond yields climbed and equity markets gained.CAD
The loonie changed little overnight, and was the worst performing of the G-10 currencies amid the risk-on environment fueling a weaker US dollar. Oil prices were barely changed and there are no economic data releases for Canada today.ASIA/PACIFIC
The Chinese yuan continued to gain against the dollar, fueled by rumors of a thawing in US-China trade tensions. Asian EM currencies and the Australian dollar joined in the rally. Asian equity markets are in the green.