Today’s Notable Sentiment Shifts
USD – The dollar surged to its highest in more than ten months on Tuesday, tracking the rise in Treasury yields, as investors looked ahead to the Federal Reserve possibly reducing asset purchases in November and an interest rate hike likely to follow.
Commenting on the rise in yields, Cambridge Global Payments noted that “yields are generally moving higher as rising inflation expectations weigh on the relative attractiveness of government bonds, but are climbing even faster in the United States as traders bet the Federal Reserve will move more quickly than its global counterparts. Rate differentials are tilting toward the dollar, weakening low-yielders and putting pressure on economies with significant borrowing needs.”
GBP – Sterling fell more than 1% on Tuesday as fears for the economic impact of a shortage of gas in Britain overshadowed Bank of England comments about a possible interest rate rise.
CIBC argues that “concurrent to the rising price concerns is the fact that the UK is also currently facing a fuel distribution issue. If the latter (fuel shortage) were to persist, that would amplify concerns over the growth profile”.
Commenting on the rise in yields, Cambridge Global Payments noted that “yields are generally moving higher as rising inflation expectations weigh on the relative attractiveness of government bonds, but are climbing even faster in the United States as traders bet the Federal Reserve will move more quickly than its global counterparts. Rate differentials are tilting toward the dollar, weakening low-yielders and putting pressure on economies with significant borrowing needs.”
GBP – Sterling fell more than 1% on Tuesday as fears for the economic impact of a shortage of gas in Britain overshadowed Bank of England comments about a possible interest rate rise.
CIBC argues that “concurrent to the rising price concerns is the fact that the UK is also currently facing a fuel distribution issue. If the latter (fuel shortage) were to persist, that would amplify concerns over the growth profile”.