October 2021 Market Wrap

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FX markets saw wild price movements in October with overbought and oversold conditions going to the extremes. Yen weakened significantly to a multi-year low, along with a surging Aussie and Kiwi on the back of risk-on mode.

In other news, the Dollar pared recent gains before closing higher towards the end of October. Rising inflationary pressures, exacerbated by soaring commodity prices stoked market wagers of a Fed taper in November. Euro dipped as the ECB reaffirmed its dovish stance, holding onto the view that higher inflation is temporary and will fade throughout 2022. Sterling outperformed against the greenback, amid expectations of an interest rates hike this year, following Governor Bailey’s hawkish comments.

Commodity currencies advanced swiftly in October, fuelled by surging energy prices with persistent supply bottlenecks and a shortage of natural gas in Europe and Asia. Notably, Aussie strengthened amid the strong surge in bond yields, skyrocketing to 0.75% after the RBA declined to defend its 0.1% target for its key April 2024 bond, fuelling bets of early interest rates hike. Markets are challenging the central bank’s stance of keeping interest rates unchanged until 2024 as recent data showed Australia’s core inflation rate jumped to a six-year high of 2.1%, hitting the RBA’s target band two years earlier than expected.

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