Euro interest rates are falling, the dollar is strengthening as safe haven demand grows

Interest rates on government bonds have been falling in the Eurozone today. In the United States, the two-year interest rate, which is sensitive to policy decisions, is rising.

The market is now closely watching how the handling of the debt ceiling problem in the United States progresses. At the same time, the market’s hope for the Federal Reserve’s interest rate cuts is starting to be lost.

President Joe Biden and Speaker of the House of Representatives of Congress Kevin McCarthy did not reach an agreement in yesterday’s meeting about the debt ceiling, but both parties are optimistic that a solution will be found. According to Reuters, McCarthy stated that a solution could be reached by the end of the week.

The solution is urgent, because the Minister of Finance Janet Yellenin according to the federal government’s money may run so low already in the first days of June that payment commitments will have to be neglected. If this ends up happening, the effects could be catastrophic for the economy.

As usual, the market also follows the development of inflation and key interest rates. Until recently, the market was pricing in the Fed’s key interest rate cuts, but the recent speeches of the Fed’s central bankers are erasing these hopes.

President of the Cleveland Fed Loretta Master said on Tuesday CNBCthat he does not believe the Fed has reached a point where the policy rate can be kept on hold, and that the Fed should stick to its current approach while inflation is persistent.

President of the Chicago Fed Austan Goolsbee told Bloombergille on Tuesday that it is too early to talk about the interest rate cut. of the New York Fed John Williams stated that inflation is still too fast.

The dollar has strengthened in recent days as safe haven demand has grown. When there is a storm in the global economy, as now when the debt ceiling is approaching, the demand for the dollar increases.

“A crushing blow to the world’s number one economy can only cause negative shock waves for the world economy and reduce risk appetite,” said Rabobankin strategy Jane Foley investing.comin by.

At the time of the review, the two-year interest rate in the United States was up 0.9 percentage points at 4.091 percent. The ten-year interest was down 0.2 percentage points at 3.532 percent.

Events in the United States are also monitored in the euro area. On the other hand, the supply of bonds in the euro area has been high this week, with several countries issuing new bonds.

“The sales rush of the last few days has mainly been due to supply. There are many risk factors now, and many investors have used this opportunity to enter the market,” said INGsenior rate strategist at Antoine Bouvet According to Reuters.

The bond’s interest rate and price move in opposite directions, and interest rates have been on the rise in recent days. Today, however, this increase has been cancelled.

At the time of the review, Italy’s two-year interest rate was down 2.9 percentage points at 3.318 percent. The ten-year interest was down five percentage points at 4.162 percent.

At the time of the review, Germany’s two-year interest rate was down 0.2 percentage points at 2.623 percent. The ten-year interest rate was down four basis points at 2.308 percent.

At 15:42 the euro fetched 1.082 dollars, 148.44 yen, 0.869 pounds and 11.336 Swedish kronor. The dollar was 137.20 yen and the pound was 1.246 dollars.

Wall Street’s Index Futures predict a bullish opening for Wednesday.