FX round-up: Ex-MPC Posen agrees with Haldane, HSBC calls end to bull-run in dollar
Even as equity markets struggled to adjust to the Federal Reserve’s surprisingly dovish message, on Wednesday evening, the currency markets continued to see significant volatility in various pairs.
At one point in the session the euro/dollar even retraced a very large part of the previous session’s moves, ending the day 1.66% down at 1.0669.
That came as Norway’s central bank sprang its own surprise on unwary investors. The Norges Bank defied the market consensus by maintaining its deposit rate unchanged. That sent the krone – a favourite ‘carry trade’ for many investors - vaulting higher by almost 2% versus the single currency.
In the background, the situation in Greece continued to simmer, with reports surfacing that the ECB had refused proposals to formally forbid Greek lenders from taking on short-term government debt.
Commenting on the recent strength seen in the greenback, HSBC’s chief currency strategist, David Bloom, called for an end to the US dollar’s bull-run. He specifically said the greenback doesn’t perform once the country’s central bank pulls the trigger, in reference to interest rate increases.
The Bank of England’s own chief economist, Andrew Haldane, also made headlines by saying that he would consider a reduction in Bank Rate should low inflation prove persistent.
In an interview with Bloomberg TV on Friday morning Adam Posen, the head of the Petersen Institute, said Haldane might be on to something.
Cable lost 1.34% to stand at 1.4760 by the end of trading.
However, for now Haldane believes the arguments in favour and against rate rises remains balanced.
Dollar/yen finished the session up by 0.56% at 120.75.