Today’s Notable Sentiment Shifts
USD – The dollar dipped on Tuesday as the rapid rise in US Treasury yields paused, and other currencies were boosted by expectations of sooner-than previously interest rate hikes.
However, Scotiabank argues weakness in USD was also due to technical factors: “The movement in rates hardly explains the extent of the USD drops. Rather, it seems USD long liquidation has snowballed into a broader clear out of positioning, triggering a technical reversal in the USD generally.”
GBP – Sterling hit a four-week high on Tuesday as expectations mount for the Bank of England to hike interest rates.
Reuters notes that “While many countries share Britain’s problems of supply chain disruption, labour shortages and soaring energy prices, investors have singled it out as a country especially prone to inflation due in part to Brexit exacerbating bottlenecks. A November hike could make the BoE the first major central bank to increase rates since the beginning of the COVID-19 pandemic early last year.”
However, Scotiabank argues weakness in USD was also due to technical factors: “The movement in rates hardly explains the extent of the USD drops. Rather, it seems USD long liquidation has snowballed into a broader clear out of positioning, triggering a technical reversal in the USD generally.”
GBP – Sterling hit a four-week high on Tuesday as expectations mount for the Bank of England to hike interest rates.
Reuters notes that “While many countries share Britain’s problems of supply chain disruption, labour shortages and soaring energy prices, investors have singled it out as a country especially prone to inflation due in part to Brexit exacerbating bottlenecks. A November hike could make the BoE the first major central bank to increase rates since the beginning of the COVID-19 pandemic early last year.”