The market had been hoping for a strong majority for Merkel and a mandate for reforming German's economy, but her chances seem to be slipping. That's taking its toll on the euro.
The introduction of a preferred inflation rate of zero to two percent has fuelled market expectations that the BOJ could raise rates before the fourth quarter, and that tightening of policy could be larger and faster than markets had previously anticipated.
The issue is whether we will see similar attitudes taken by other Middle Eastern banks. It is a question of momentum.
Eurodollar futures could price in a peak fed funds rate in excess of 4.5 percent, and that would certainly be bullish for the dollar.
In light of the election result... any brewing independence movement seems to have moved to the periphery of investors' thoughts.
It's Bollard's dilemma: consumers are feeling the pain, yet he is chasing an inflation target. The more he puts up rates, the more attractive the currency is for foreign investors.
We expect the ECB to hike rates this week. These are good levels to re-establish long positions in the euro.
Copyright © 2024 Electric Goat Media. All Rights Reserved.