Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Carney's Comments Cast Many Doubts About European Easing

Published 10/26/2016, 02:16 PM
Updated 07/09/2023, 06:32 AM

Tuesday's comments from Bank of England (BoE) Governor Mark Carney cast doubts on the increasing expectations of an injection of monetary stimulus in Europe. This caused the U.S. dollar to dip from its almost eight month against the euro. The U.S. dollar's value relative to the Japanese yen also fell from its three month peak.

Within Governor Carney's statements, he emphasizes the point that the BoE would "undoubtedly" examine sterling silver's increasing weakness during the bank's upcoming rate-setting meeting. This damaged investor confidence that the bank would soon cut interest rates. According to analysts, this also hurt the underlying notion that the European Central Bank (ECB) would soon turn to aggressive quantitative easing.

These comments are contrary to the BoE's September statements which implied interest rates would again be cut if the economy continued down its stagnant path.

According to Kathy Lien, managing director at New York's BK Asset Management firm, the consequential decline in the dollar was most likely the result of traders hedging their short bets against the euro to cover losses, resulting in a quick recovery of the European currency and sterling.

The U.S. dollar index, which compares the currency against a variety of other major currencies, moved up 3.4 percent in October. The increasingly supported notion that the Federal Reserve would clamp down on monetary policy in December, as well as the loose monetary easing policies being implemented in Europe and abroad, are what fueled the U.S. dollar's rising value.

Because of the comments, the dollar index dipped 0.07 percent to 98.687 from its nine month peak of 99.119.

Meanwhile, the euro has risen 0.09 percent against it's greenback counterpart to $1.0890. The dollar's value against the Japanese yen has stood stagnant at 104.17 after approaching a three month high of 104.87 during the early hours of the New York trading session.

Despite the push back, the dollar stood surprisingly strong against the Swiss franc at 0.9943, but has been unable to match its eight month high of 0.9998.

According to Richard Scalone of TJM brokerage in Chicago, "You caught the dollar leaning too long dollars."

The growing expectations that the Federal Reserve will raise interest rates in December remain strong. The dollar's losses would have most likely been larger without these expectations. The updated CME Group's FedWatch tool, which measures policy consensus among traders, shows that investors are 78 percent confident the central bank will raise interest rates in December.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.