The US Dollar (USD) has another go on Wednesday as markets tremble and crack in every pillar. The bond market sees its yields surge again, with the US
Equites took a short nosedive move on Wednesday with the S&P 500 breaking below the 55-day Simple Moving Average . With the surprise 0.75% rate cut from the Polish Central Bank, analysts are further increasing the rate divergence trade where US rates will remain elevated for longer and Europe, the United Kingdom and Central European countries will have to cut quicker and more aggressively in order to avoid a crashing economy.
A chunky batch of US Federal Reserve speakers: Patrick Harkers from Philadelphia is to kick off the headlines at 14:00 GMT. Next Fed member Austan Gooldsbee from Chicago will speak at 15:45 GMT. At 19:30 GMT, John Williams from New York will speak together with Raphael Bostic from Atlanta. Michelle Bowman will deliver the last remarks from Fed members this Thursday around 20:55 GMT.
The benchmark 10-year US Treasury bond yield trades at 4.29% and keeps heading higher after the US Treasury issued quite a lot of debt paper on Tuesday. The auctions flooded the markets with supply and saw yields ramping up. Taking a step back to the recent turn of events, it becomes clear that this week has already been a seismic shift from this year’s monetary policy for several big central banks.
It is a non-standard policy measure used when credit has dried up because banks will not lend to each other . It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
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