Selling Returns after Yesterday's Relief Rally
29 September 2022
Sentiment deteriorated sharply again on Thursday as Wednesday's risk-on rally failed to impress, putting risk assets under pressure.
During the London session, equity indices were down between 1-2%, while the USD pushed sharply higher, along with US bond yields.
ECB willinkg to hike rates
Furthermore, ECB President Christine Lagarde spoke at a US-European GeoEconomics seminar and declared that rates would continue to rise over the following sessions. Additionally, Martins Kazaks, the governor of the Bank of Latvia, and Peter Kazimir, a member of the ECB's governing council, were on the wires in favor of a 75 basis point rate increase at the October meeting.
A number of ECB speakers will be featured on Thursday, and investors will also be looking at inflation data for Spain and Italy as well as figures for consumer confidence across the Eurozone.
In other news, In order to stabilize the market, the BOE decided to begin purchasing long-dated UK government bonds Wednesday. However, later, it acknowledged that it could only purchase 1.025 billion GBP during the emergency QE operation, far less than the anticipated 5 billion GBP. With the announcement, long-term yields fell dramatically.
As a result, the GBPUSD pair rose circa 300 pips in a massive relief rally, only to give up one-third of those gains on Thursday.
In addition, the first gilt sale operations, which were scheduled to begin next week, have also been delayed by the central bank until October 31. Strong worldwide criticism was leveled at the budgetary plan.
The Energy Information Administration reported late Wednesday that US crude oil stocks dropped by 215,000 barrels in the week to September 23. Still, gasoline inventories saw a far larger loss of 2.4 million barrels than anticipated.
Both oil benchmarks had fallen to nine-month lows this week before soaring about 4% during the previous two sessions. A Category 4 storm made landfall in Florida, unleashing torrential rains and posing a serious flood risk, but it has now considerably abated.