The Pound performance on Thursday was broadly the same as the previous day with the UK currency initially struggling before posting gains. Housing-sector resilience will make central banks more comfortable in raising rates, but there are clear dangers that confidence will weaken very sharply which would trigger a major reassessment of the outlook for interest rates and currencies. ![]() Higher interest rates will tend to undermine the housing sector, but the Bank of Canada cited evidence that the housing sector was bouncing back and there have also been similar comments from Federal Reserve officials. The housing data will also be a key element in the short term. In this context, inflation data and central bank communications will remain very important for markets in the short term with key US releases next week.Įxpectations of higher interest rates will tend to keep equity markets on the defensive. He added "The BoC is signaling that more rate hikes could come and that has everyone rethinking that the Fed will be done after the July hike." In this context, there will be further concerns that global central banks will have to be more aggressive in raising interest rates to combat inflation.Įdward Moya, senior market analyst at OANDA commented "Canada's central bank is viewed as one of the leaders when it comes to being proactive with monetary policy." The Bank of Canada decision to raise interest rates on Wednesday will fuel these fears over persistent inflation in the services sector. In contrast, concerns over sticky and persistent inflation in the services sector have tended to increase. Inflation developments will remain a very important factor for global markets in the short term, especially given the implications for interest rates.Ĭonfidence that inflation pressures are no longer a major problem in the manufacturing sector has increased.
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