BoE Sights Sight, Pound Leads Over Dollar
rebound. The Bloomberg Dollar Spot Index (BBDXY) remained largely unchanged after rising 0.2% yesterday, as Powell emphasized a data-dependent policy path. The 10-Year US Treasury yield fell 3 bps to 4.05%, while money markets are pricing in a Fed rate cut of ~44 bps by year-end.
In the options market, leveraged desks are buying weakness in major currencies. The BBDXY's 1-month risk reversal of 14 bps (puts > calls) indicates a bearish dollar skew. EUR/USD rebounded from a low of 1.1781 to 1.1839 (+0.2%) amid interest in topside digital options; although the euro's long-term outlook is supported by options, the chart is warning bulls.
The pound rebounded 0.1% to 1.3648 ahead of the BoE decision. Consensus expects interest rates to be held at 4% today. The spotlight is on the future of the quantitative easing program, amid concerns that gilt sales are exacerbating volatility in the UK bond market.
Other movements: NZD/USD fell 1.2% to 0.5892 after the New Zealand economy shrank more than expected and expectations of a 50-bps cut by the RBNZ increased. AUD/USD briefly fell -0.6% to 0.6616 after jobs data fell, although unemployment remained stable. USD/JPY weakened to 147.31 after halving its gains, with the Bank of Japan expected to hold rates. EUR/NOK fell 0.3% to 11.5691 after a hawkish Norges Bank cut (the second cut this year, signaling a slower pace of further cuts). (ads)
Source: Newsmaker.id
