EUR/USD Close To 20-year Lows, IMF Criticizes The UK Government (EUR/GBP, GBP/USD)

Summary:

• The Euro is looking down at a 20-year low against the US Dollar.
• A BoE statement said that it would interfere in the bond markets.
• Federal Reserve could be obliged to speed up the rate at which it raises interest rates.

US Treasury 10-year note exceeds 4%

The market is reflecting mixed signals for this currency pair. As a result of a mix of Fed and White House rhetoric that puts the brakes on a shift in market conditions, the Euro is looking down a 20-year low against the US Dollar. Overnight, St. Louis Federal Reserve President James Bullard reiterated the determination of the Fed to stare down price pressures when he said, “There’s a lot of tightening in the pipeline,” and “we have a serious inflation problem in the US.” Evans and Kashkari, two additional Fed board members, backed up his aggressive remarks. Treasury rates in some areas of the curve have increased to levels unseen in decades as a result of all this talk. For the first time since 2008, the yield on the 10-year note exceeded 4%. Government bond yields in developed markets around the world are escalating. The probable disruption of three Russian gas pipelines has made the situation in the Euro worse and driven up prices.

✕ EUR/USD Price Chart

British pound to dropped quickly on Wednesday

The market is reflecting mixed signals for this currency pair. The UK government's fiscal stimulus program, which was revealed last Friday and over the weekend, has received harsh criticism from the International Monetary Fund. Huw Pill, the chief economist at the Bank of England, said that the monetary policy should react appropriately to the fiscal policy. The Bank of England's statement that it would interfere in the bond markets caused the British pound to drop quickly, but a recovery later in the day indicated that markets are generally supportive of the central bank's decision to settle the bond markets. The Bank said unexpectedly that it would purchase long-dated UK assets in order to limit their yields.

✕ EUR/GBP Price Chart

Pound has a strong inverse relationship with risk

The market is reflecting mixed signals for this currency pair. The publication of better-than-expected statistics out of the U.S. overnight caused a decline in global markets, which in turn led investors to wager that the Federal Reserve could be obliged to speed up the rate at which it raises interest rates. Stock markets were affected by expectations of rising rates, which also helped the dollar and put pressure on other weaker currencies like the pound. The Pound has a strong inverse relationship with risk and tends to decline as the world markets decline. The announcement of new orders for durable goods data, which showed a dip of 0.2% in August but was better than the average expectation for a decline of 0.3%, was what first caused the decline in Sterling and other risk-sensitive assets.

✕ GBP/USD Price Chart

Sources: finance.yahoo.com, poundsterlinglive.com, dailyfx.com