Bond Markets dominate FX sentiment

(Reuters SYDNEY) The Australian and New Zealand dollars were stuck in a rut against their US counterpart on Tuesday, but stood near multi-month highs on the Japanese yen as traders remained focused on divergent monetary policy globally.

The Australian dollar held at US$0.7602, well off the recent high of US$0.7712. The Aussie had barely moved on Monday, ending that session at US$0.7607.

“After nearly a decade of loose monetary policy, global central banks are looking to turn down the music at the global bond party that has raged on well past its expected shelf life,” said Stephen Innes, senior trader at Oanda.

“Despite this growing sense of reality setting in, traders remain tied up in knots fearing inflationary data surprises.”

Trading volumes were below June’s average daily turnover as traders awaited comments from Federal Reserve Chair Janet Yellen for fresh cues on policy direction. The Bank of Canada is due to meet on Wednesday when it is expected to hike interest rates for the first time in almost seven years.

“Perhaps the tepid volumes are reflecting reduced summer positioning, a lack of interest or a bit of both. However, that tune will change as we move deeper into a potentially dangerous trading week,” Mr Innes added.

Via Reuters

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Stephen Innes

Stephen Innes

Head of Trading APAC at OANDA
Stephen has over 25 years of experience in the financial markets and currently based in Singapore as the Head of Trading Asia Pacific with OANDA. Stephen's market views focus on the movement of G-10 and ASEAN Currencies. His views appear in Bloomberg, CNBC.Reuters, New York Times WSJ and the Economist. His media appearances include Bloomberg TV & Radio, BBC International, Sky TV, Channel News Asia, ASTRO AWANI and BFM Malaysia. Stephen has an extensive trading experience in Spot and Forward FX, Currency and Interest Rate Futures, Money Market Derivatives and Precious Metals. Before joining OANDA, he worked with organisations like Nat West, Chemical Bank, Garvin Guy Butler, and Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.
Stephen Innes