Market news

16 December 2021

Forex Today: Central banks’ marathon coming to an end

What you need to know on Friday, December 17:

Following the US Federal Reserve announcement on Wednesday,  the Swiss National Bank, the Bank of England and the European Central Bank, have announced their monetary policy decisions, and except for the SNB, all of them announced tighter monetary policies.

The European Central Bank announced a cautious taper pretty much in line with the market’s expectations. The ECB kept rates on hold and confirmed the Pandemic Emergency Purchase Program will end in March 2022. The Government Council also decided to expand its Assets Purchase Program to €40 billion per month in the second quarter and to €30 billion in the third quarter, to partially compensate the end of the monthly  €60 billion bond-buying through PEPP

The Bank of England Monetary Policy Committee voted by a majority of 8-1 to increase the benchmark rate to 0.25% and by a majority of 9-0 to maintain the amount of quantitative easing at £895b.

The SNB maintained its expansionary monetary policy to ensure price stability, and support the local economy in its recovery from the impact of the coronavirus pandemic. It is keeping the SNB policy rate and interest on sight deposits at SNB at −0.75%.

A note of colour, Turkey’s central bank cut the main interest rate to 14% from 15%, pushing TRY to a new record low of 15.74.

The EUR/USD pair peaked at 1.3360, while GBP/USD reached 1.3374. Both retreated during US trading hours, to settle at 1.1320 and 1.3310 respectively. The AUD/USD pair trades around 0.7180 down from the 0.7220 region. The aussie benefited from upbeat local employment figures. The USD/CAD pair is down to 1.2780.

Finally, the USD/JPY pair trades at 113.70 ahead of the Bank of Japan monetary policy decision, widely anticipated to remain on hold.

Gold was among the best performers, advancing for a second consecutive day and currently trading around $1,795 a troy ounce. Crude oil prices were also up, with the barrel of WTI currently trading at $72.50.

European indexes posted substantial gains, but Wall Street was unable to follow the lead, and traded mixed. US Treasury yields spent the day consolidating, showing little reaction to central banks’ news.

Meanwhile, multiple countries continue to report record cases of coronavirus contagions, related to the Omicron variant. Tighter measures are being imposed in places such as the UK and South Korea, to try to curve the spread and prevent the collapse of health systems.

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