The global tightening spree has just started

The global tightening spree has just started
The global tightening spree has just started

What you need to know on Thursday, October 28:

The greenback seesawed between gains and losses, ending the day weaker against most major rivals, although within familiar levels.  Demand for the greenback eased as yields retreated further. The yield on the 10-year Treasury note currently stands at 1.54%, while that on the 2-year note ticked higher, now at 0.50%. The yield curve is flattening, usually a hint of a rate hike cycle.

Speculation of tighter monetary policies across the board was fueled by news that Australian inflation surged at its fastest annual pace since 2015 in the three months to September. According to the official report, the RBA Trimmed Mean CPI was up 2.1% YoY, well above the 1.8% expected and the previous 1.6%. The quarterly figure printed at 0.7% up from 0.5% in the second quarter. Investors were caught off guard and rushed to price in an earlier interest rate hike.

Additionally, the Bank of Canada announced it has decided to end its weekly purchases of government bonds, the first central bank to end pandemic-related facilities, surprising investors who were speculating on a gradual reduction of QE. The US Federal Reserve, the Bank of England and even the European Central Bank, are also in the tapering path, with movements there expected for the next quarter. The Bank of Japan and the ECB will announce their decisions this Thursday, while the Fed will meet next week.

Global indexes edged mostly lower. In Wall Street, only the Nasdaq Composite was able to post some gains.

Gold edged higher, ending the day around $1,796 a troy ounce, while crude oil prices plummeted. WTI settled at $82.10 a barrel after the EIA reported a larger than anticipated build in local stockpiles of 4.267 million.

 


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