USD Drives Markets as Euro Punches Lower

EUR/USD

The Euro is working towards a 20-year low against the US Dollar as a combination of the Fed and White House pull the pin on a change in circumstances for markets.

St. Louis Federal Reserve President James Bullard invoked the spirit of Paul Volker and highlighted that there were 4 recessions over 13 years in the 1970s and early 80s. This was due to the high and volatile inflation that Mr. Volker reined in.

The hawkish comments were supported by the other Fed board members, Evans and Kashkari. All this rhetoric has lifted Treasury yields to levels not seen in decades in some parts of the curve. The 10-year note went above 4% for the first time since 2008. Developed market government bond yields globally are following the move north.

White House economic advisor Brian Deese does not see a Plaza accord type agreement, hosing down speculation of any form of currency management from the administration.

EUR/USD broke below Monday’s low and traded under 0.9550, while GBP/USD is also eyeing lower levels into the European day. The Euro has been affected by the potential sabotage of 3 Russian gas pipelines, increasing prices.

The IMF has lambasted the UK government’s fiscal stimulus measure that was announced during the weekend. The Chief economist of the BoE, Huw Pill, stated that the fiscal policy would require an appropriate monetary policy response.

The Chinese Yuan traded at levels not seen since 2008 against the US Dollar.

Australian retail sales came in at 0.6% for the month of August, a beat on the 0.4% forecast yet pushing AUD/USD from making a fresh 2-year low.

USD/JPY is nudging toward 145 again as the market awaits intervention from the Bank of Japan. In the risk-off environment, APAC equities are taking the lead from Wall Street.

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