Speculation against the Euro piles on

Today's news headlines:

‘Investors increase bets against euro as energy crisis intensifies’. The Euro hit 20-year lows last week as electricity and gas prices soared to all-time highs amid fears of Russia constricting energy supplies and leading the Eurozone into recession. In the largest bearish position against the Euro since the pandemic began in March 2020, investors held net short positions on the common currency of over 44,000 contracts in the week leading up to August 23rd—an increase from the 42,800 seen the week previous. Meanwhile, talks from US Federal Reserve Chair Jerome Powell on Friday resulted in bullishness on the US Dollar as he hinted at further interest rate hikes in a bid to tackle surging inflation. (Financial Times).

‘Chinese borrowers pile the pressure on banks with early mortgage payments’. This year, several state banks in Beijing and Shanghai have seen a 20 percent rise in mortgage prepayments as Chinese domestic property owners hurry to pay off their mortgages early. Beijing’s strict Zero-Covid policy, coupled with falling returns on investments, has resulted in massive economic disruption causing residential property owners to reduce their interest payments by making early and unscheduled mortgage contributions. Data from the National Institution for Finance and Development has revealed Chinese household indebtedness, a measure of household debt to national GDP, had increased from under 5 percent in 2000 to 62 percent by the end of last year. (Financial Times).


Today

All eyes turn to today's online webinar speech from New York Fed President John Williams as investors hope he'll give some much-needed insight into the plans for potential US interest rate hikes for the remainder of the year. The US Dollar struggles to regain momentum against the Euro as speculation of a possible 0.75% interest rate increase from the European Central Bank increases; this seems to have overshadowed any potential hawkishness from the Fed. Brent oil rallied over the weekend from under $92 a barrel to almost $97 and has remained at this level since yesterday afternoon.

Events

Japanese Unemployment Rate: 2.6% vs 2.6% previously
Spanish flash Consumer Price Index y/y: 10.4% vs 10.8% previously
German prelim Consumer Price Index m/m: All day
Italian 10-y Bond Auction: Tentative
US Conference Board Consumer Confidence: 3:00PM
US Federal Open Market Committee member John Williams speaks: 4:00PM


Interbank rates*:

GBP/USD – 1.1710
GBP/EUR – 1.1720
EUR/USD – 0.9990
GBP/CAD – 1.3010

 

Please contact your Dealer about any upcoming FX requirements you may have, or call +44 (0)20 3465 8200. 

*Indicative interbank rates taken on the day of writing. Please speak to your Dealer to find out the current rates available for you.