Forex · Forex Flash Central bank rhetoric is driving the market

Key arguments

• Dollar strength is driven by the US interest-rate differential, with the Fed hawkish and Treasury yields at their highest since 2007.
• EUR/USD remains pressured despite the ECB's September hike, as Lagarde signals only a measured response.
• Geopolitical risk from the Iran-US conflict and the Trump-Xi summit, plus oil above $100, keeps risk aversion high.
• Scandinavian and Swiss central banks diverged: Norway hiked, Sweden paused with a tightening bias, Switzerland stayed at zero.

Corresponding source evidence

1. Norges Bank raised rates by 25 basis points to 4.5 per cent; the Riksbank kept its rate unchanged at 1.75 per cent but signalled a rise by the end of the year; whilst the SNB confirmed its rate at 0per cent, standing out with a decidedly more accommodative message.
2. Next week will begin with the US dollar in a dominant position, at nearly two-month highs against major currencies, buoyed by the surge in bond yields and growing expectations of a further Fed rate hike in October, now priced in at 83% by the market. · next week
3. Norges Bank raised rates by 25 basis points to 4.5 per cent; the Riksbank kept its rate unchanged at 1.75 per cent but signalled a rise by the end of the year; whilst the Swiss National Bank (SNB) confirmed its rate at 0 per cent, standing out with a decidedly more accommodative message.