Goodbye Ma’am and thank you
It is so very sad to hear of the death of her Majesty the Queen. You don’t even have to be a royalist to recognise the significance of the passing of a Monarch who reigned for 70 years or the ending of a life that has touched so many people in every corner of the world and that of a woman who was so widely respected. In bidding a fond farewell to Her Majesty, we can also express our sympathies to King Charles III on the loss of his beloved mama and wish him every success in his task of reforming the nature of the Royal family.
ECB lifts rates as per forecast
Whilst the UK news was inevitably dominated by Queen Elizabeth’s death, the euro was manoeuvring around the news of an interest rate hike from the European Central Bank. The 75 basis point hike was exactly what the market expected and it brings the eurozone base rate up to 1.25%. As mentioned previously, this is very likely to encourage investors back to the euro now that they will not be paying banks to hold their funds on deposit. We are awaiting news that retail banks have ceased the practice of charging negative interest rates on client funds. More of that when we hear. It would be easy to draw the conclusion that the rise in the EURUSD rate we have witnessed in the last 24 hours was driven by the ECB’s decision but that is much more a story of US dollar weakness. although the EURUSD rate is back above parity with the USD and up nearly a cent to $1.0080, the GBPUSD rate is up by 1.3 cents to $1.1605 and the USDJPY rate is down to JPY142.60, having been 2.5 yen higher on Wednesday. Within that melee, the GBPEUR rate is largely unchanged at €1.1520. There is no significant data from the eurozone today but there is a meeting of the finance ministers of the eurozone which may yield some comment before the day is over.
USD weaker as treasuries sell-off
Mixed messages coming from the US Federal Reserve have caused a bit of a US dollar sell-off, or maybe just profit taking the top off the recent US dollar surge. As mentioned above, The GBPUSD rate is back above $1.16 after a US Treasuries sell-off which generally suggests investors are apt to take a little more risk in their portfolios. The Fed isn’t the only reason for a change in investor mood. Only 222,000 fresh claims were filed for unemployment benefits in the last week and that brought the four-week average down to 233,000; a fairly convincing sign that the US economy is doing OK. We don’t have a lot of information coming from the other side of the Atlantic today, so there is a good chance the US dollar will trade in its current ranges.