EUR/USD is up by over 0.9% in midday trade on Wall Street aided by a weaker US Dollar and ahead of the European Central Bank's policy meeting on Thursday. Expectations call for the ECB to deliver a 50-basis point hike and hawkish rhetoric is assumed which is buoying the Single Currency which has traveled from a low of 1.0650 to a high of 1.0748 so far.
Meanwhile, the US Dollar continued to bleed heavily on Monday as markets bet the Federal Reserve will be less aggressive in raising interest rates to curb inflation. US authorities have made moves to try to lessen the damage from the recent collapse of Silicon Valley Bank.
A new Bank Term Funding Program will offer loans from the Federal Reserve of up to one year to depository institutions, backed by United States Treasuries and other assets these institutions hold.
Consequently, the US dollar index, or DXY, which measures the greenback vs. a basket of major currencies, has dropped to a fresh low of 103.484, tracking the fall in short-dated Treasury yields. The two-year note was paying as low as 3.997% at one point in New York trade and tumbled from the start of the week´s highs of 4.534% in the biggest one-day drop since the financial crisis of 2008, on track for its biggest three-day decline since the Black Monday crash of 1987. Meanwhile, Fed funds futures have been repriced as traders expect that the Fed's terminal rate will be lower. Markets are now pricing as low as 4.14% for December which was originally priced above 5% on Friday. Moreover, futures are showing a 21% chance of no hikes in rates from the Federal Open Market Committee when announcements will be made on March 22.
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