Rates as of 0500 GMT

Market Recap

Looking at the second graph above, today seems to be largely a continuation of yesterday most of the currencies fall pretty neatly on the green continuation line. The exceptions are currencies that havent changed that much today.

If we exclude CHF and USD, then currencies largely moved in line with their bond markets. GBP is doing worse than the others given the performance of its bond market, probably because of the political issues there. There may also have been some reaction to the hearing for incoming Monetary Policy Committee MPC member Swati Dhingra. She said that she favors a gradual approach to raising rates. Since she is replacing Michael Saunders, one of the most hawkish members of the MPC, this meas less support for rapid tightening in the future.

You can see then what outliers CHF and USD are when we include them in this chart.

We discussed yesterday how the market is reassessing the outlook for Swiss National Bank SNB tightening over the next two years. Meanwhile, yesterday the market reassessed the outlook for European Central Bank ECB tightening after a downward surprise in the German harmonized index of consumer prices HICP see table above.

That, together with weak risk sentiment, monthend flows, and a worsening European growth outlook caused EURCHF to break below parity for the first time since the SNB removed the EURCHF floor in 2015. It briefly broke through that level in March of this year during trading…