Monday, March 4, 2024
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Market Thinking: King Dollar

Tom Westbrook’s outlook on the future of European and global markets

As the days of zero interest rates in Europe are coming to an end, it’s starting to look like just a 75 surprises could save the euro, not to mention the pound.

Asian session already belongs to USD. Have passed 144 yen, test 7 yuan. Sterling is on the verge of breaking its pandemic lows, while the euro is eyeing 50s.

German industrial production data, finally euro zone economic growth and Bank of England Governor Andrew Bailey’s appearance in parliament will be in focus today, but the focus will be on the dollar and tomorrow’s ECB meeting.

Market pricing means 70% 50 bps probability of a rate hike, which also Means just 50 bps will be a disappointment that could weigh on the euro buckling under the risk of recession.

Again, even bigger might not be enough. A big interest rate hike in Australia this week did nothing to help the Aussie, as the greenback has taken the world by storm.

A Reuters poll showed that the euro has been hovering at this level for several months but has not collapsed, as has the pound.

In China, investment banks have been scrambling to cut yuan forecasts as data take a bleak turn. Disappointing trade data on Wednesday provided the latest installment, although Australia offered a glimmer of hope as growth accelerated in the second quarter.

Asian markets fell broadly, hitting two-year lows.

Euro falls as Ukraine war sparks gas crisis https://fingfx.thomsonreuters.com/gfx/mkt/lgpdwdlzjvo/Pasted%50image%201662469552346.png

Major developments that may affect the market on Wednesday:

Economy: German Industrial Production, Eurozone Final GDP

Speakers: Bank of England Monetary Policy Committee, including Governor Andrew Bailey, at HM Treasury Statement by the Special Committee

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