Big Swings in Markets Continue
18 October 2022
Yesterday's massive rally in US equity indices led to further gains during the Asian session, with US equity futures trading more than 1% stronger during the EU session on Tuesday.
Furthermore, the dollar continues to weaken amid the shift in the sentiment, bringing the EURUSD closer to parity, while the so-important GBPUSD nowadays rises toward the critical 1.15 level.
Elsewhere, despite Japanese Finance Minister Suzuki's announcement that they would respond to speculative moves while cautioning that they are watching FX "motions," USD/JPY continued to rise and is currently trading at 149.00.
In front of the German and Eurozone ZEW confidence indexes, euro bulls are still cautious as the survey is expected to show another massive decline in business confidence. However, on Monday, Robert Habeck, Germany's minister of economy, stated that "fiscal policy can prevent a serious recession in Europe without fueling inflation."
Meanwhile, the majority of the tax and spending initiatives that Prime Minister Liz Truss had previously outlined were canceled by the country's new finance minister, Jeremy Hunt, on Monday, allaying fears about the scale of the additional borrowing required to pay for the plans.
Morgan Stanley now expects a rise of 75 basis points .vs its earlier estimate of 100 basis points, suggesting that the Bank of England may not raise interest rates by as much as initially predicted in November.
In order to promote more stability in the gilt markets, the BoE is also expected to postpone the sale of billions of pounds worth of government bonds, the Financial Times said on Tuesday.