Rates as of 0500 GMT
Ive found this new graph to be useful in understanding what went on overnight. Today for example we can discern two different groups of currencies those that continued in the same direction they were going on Wednesday AUD, NZD, and USD and those that reversed GBPand CAD.
The continued rise of AUD and NZD and the further retreat of USD are easy to explain as a result of continued riskon sentiment arising from President Biden finally reaching a bipartisan deal on infrastructure. The bill includes roughly 579bn in new spending and 1.2tn over the next eight years including existing programs. Significantly, the bill is not being paid for by tax increases, which adds to the stimulus they had to assume that the investments would generate greater economic growth to make the numbers work, but that just means its deficit spending.
The news pushed both the SP 500 and NASDAQ indices further into record territory. Europes STOXX 600 was also up 0.9 to approach its record high.
Meanwhile, the fear index on Wall Street, aka the VIX Index, fell further, almost hitting its postpandemic low.
If AUD and NZD continued on, why did CAD retreat so perfectly, especially when oil prices were higher? The two had been traveling together for some time but diverged midday yesterday.
It may have been caused by the modest widening in yield differentials as US bond yields moved up a bit but Canadian bonds remained steady. Note that in contrast, AUD and NZD…