Reuters: The dollar headed for weekly gain on Friday, aided by solid U.S. growth figures that bolstered the case for higher-for-longer interest rates, while the yen hovered on the weaker side of 150 per dollar ahead of a key policy meeting next week.The U.S. economy grew at its fastest pace in nearly two years in the third quarter as higher wages from a tight labor market helped to power consumer spending, data on Thursday showed.
“The retreat in yields was to do with a little bit of flight to quality, because what you saw last night was pretty devastating action in the equity market,” said Tony Sycamore, market analyst at IG. Treasury yields move inversely to bond prices. “The last few Fridays we’ve seen very much flight-to-safety type moves because ahead of the weekend, we’re not really sure what’s going to be playing out in terms of Gaza,” said Sycamore.
The BOJ is due to meet next week, amid mounting speculation that the central bank could change its bond yield control, with a hike to an existing yield cap set just three months ago being discussed as a possibility. “If we come in with dollar/yen up at 151 next Monday, then there’s more chance I think they’d lift the cap,” said IG’s Sycamore. “The higher the dollar/yen goes in the interim, the more chance there is of a tweak.
Money markets now are pricing in no further rate increases, and rate cuts as early as June next year. In an interview with the Belfast Telegraph published on Friday, BoE Governor Andrew Bailey said inflation data for September, which failed to fall as most economists predicted, was not far off what the central bank had expected.
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