The euro jumped almost 0.75% to $1.0487 pushing the dollar index off a 20-year high in the process.
LONDON/SYDNEY rallied on Wednesday on news the would hold an emergency meeting on the recent bond market sell-off ahead of what is expected to be the most aggressive rise in U.S. interest rates since 1994. Hopes of a quiet run in to what is forecast to be a three-quarter point hike by the Federal Reserve later were quickly dashed as the ECB’s unexpected meeting – less than week after its last scheduled one – triggered a rush of activity. The euro jumped almost 0.75% to $1.0487 pushing the dollar index off a 20-year high in the process. Italy’s 10-year bond yields, which have risen to 8-year highs as euro zone debt worries have returned, charged back under 4% on course for the biggest daily fall since the start of March. Italy’s stock market also jumped 2% as its banks leapt 6%. Europe more broadly climbed 0.5% while the euro’s rise also scored a 16-month high against Britain’s pound as it suffered the Brexit blues again. [/FRX]
“The best laid plans of the ECB and President Lagarde to normalise policy in an orderly fashion have just run into the reality of the bond market”, said Societe Generale strategist Kit Juckes.
“The big question is whether it is even possible (to normalise policy) or we are just stuck in the same old world where we need some kind of asset buying programme to hold the bond market together”, he added. The worries about rising borrowing costs and inflation globally have been hammering financial markets all year. Economists fear drastic Fed action in particular could tip the world into recession and the degree to which the U.
