Last night saw major ructions in currency markets as more central banks turned hawkish. Via Reuters:
European Central Bank President Christine Lagarde fuelled expectations of faster policy tightening, as she focused on the prospect of euro zone inflation overshooting. She also did not repeat previous comments that interest rates in the region were not likely to rise this year. Lagarde acknowledged on Thursday that euro zone inflation was running hotter than expected, with risks tilted to the upside.
As a result of these rate expectations, Euro shot nearly 200 pips higher, taking it to a three week high and completely filling in the losses since the Fed last hawkish meeting:
In Brexit-land, the BOE hiked rates for the second time in three months, sending Pound Sterling higher against USD as it continued its surge:
Meanwhile, the Australian dollar remains in a holding pattern, still unable to get out of its recent funk after breaking below the 70 cent barrier versus USD:
While on the crosses, against Pound Sterling the Pacific Peso is about to push through the 2021 high (upper horizontal black line):
And against Euro it pushed up to the 1.60 handle, not quite matching the 2021 high but about to take out the downtrend line:
The Australian dollar is not going to be the currency to hold in 2022, except maybe against the Kiwi, but even the RBNZ is firmly in the hawk’s nest while the doves at Martin Place go and play Wordle.