Yesterday, the Euro surged above $1.18 against the Dollar, for the first time since January 2015, supported by expectations for a more hawkish monetary policy stance from the European Central Bank.
Furthermore, the Euro extended gains after Trump removed his White House Communications Director Scaramucci. His departure follows one of the rockiest weeks of Trump’s presidency in which a major legislative effort, a healthcare overhaul, failed in Congress and both his spokesman and previous Chief of Staff left their jobs.
This Monday, Sterling strengthened and hit $1.32 for the first time in over 10 months, as investors eyed this week’s Bank of England (BoE) “Super Thursday” for a steer on whether record-low interest rates could soon be lifted for the first time in more than a decade.
The Pound has been supported in recent weeks by expectations the bank might finally be getting ready for a hike after a series of hawkish comments from policymakers.
As for Australia’s Dollar, the currency briefly pared gains before rebounding toward a two-year high as bulls remained undeterred by the Central Bank’s concern over the strength of the currency. The RBA said in a statement yesterday that a stronger currency is likely to contribute to slower inflation and growth. It kept the interest rate at a record low of 1.5%, and maintained its forecast for the economy to expand around 3% in the next couple of years.
Meanwhile, the specter of tighter US sanctions is pushing up the perception that Venezuela is getting closer to defaulting on its Bonds. Venezuela is awaiting possible further restrictions after the US, its largest trading partner, sanctioned President Maduro after Sunday’s elections. The implied probability of Venezuela missing a payment over the 12 months rose to 62% Monday, according to CDS data.