Global risk appetite remains buoyant, thanks in part to some dovish Federal Reserve and European Central Bank comments in the past 24 hours. FOMC members Mester, Bostic and Barkin had a similar message, namely that the slow recovery in US economic growth requires loose US monetary policy and
that higher inflation will at worst be temporary.
US 2-year Treasury yields fell in the wake of these comments back to their multi-year lows and the S&P 500 yesterday closed higher for the sixth consecutive session – the first time this has happened since late-August. In the process the index closed at a new all-time high of 3,915.6. The “safe-haven” Dollar is today down for the third consecutive session, its negative correlation with US equities firmly re-established.
All major currencies have made decent gains versus the US Dollar in the past 48 hours. After numerous failed attempts the GBP/USD cross finally breached the 1.374 level overnight. However, it has slightly underperformed the Euro with the Eurozone currency getting a boost from dovish comments by ECB
President yesterday which echoed the view of her counterparts at the Fed. At time of writing the GBP/EUR cross is down 0.6% since Friday morning.
