Deutsche abandons forecast for weaker euro, calls end to dollar rally

The bond market sell-off and jump in the euro came as a dive in technology stocks after the latest global cyber attack sent European shares to a two-month low. Dow futures were almost flat while S&P futures inched lower, suggesting a tepid start to trading on Wall Street.

The euro hit a 10-month high on Wednesday after the European Central Bank chief hinted the days of the ECB’s aggressive stimulus are numbered, and as the dollar was pressured after a vote on USA healthcare legislation was delayed.

In her first public remarks since hiking rates June 14, Yellen on Tuesday once again reiterated the US central bank’s commitment to raise interest rates very gradually.

MARKET INSIGHT: “The net effect of last night’s speeches by Yellen and Draghi has been to reinforce a view that markets are now embarking on a phase of global policy tightening with the European Central Bank potentially moving faster relative to the Fed than many had expected”, Ric Spooner, chief analyst at CMC Markets, said in a commentary.

Hong Kong’s Hang Seng led declines, falling as much as 0.7 percent.

Overnight, U.S. stocks fell as Senate Republican leaders abandoned a vote on legislation overhauling the Affordable Care Act and the International Monetary Fund cut its outlook for U.S. economic growth.

In Asia overnight, MSCI‘s broadest index of Asia-Pacific shares outside Japan dropped 0.4 percent as it pulled back from a two-year high hit on Monday. The Shanghai Composite index in mainland China lost 0.6 percent to 3,173.20, while Australia’s S&P/ASX 200 gained 0.7 percent to 5,755.70. The delay added to investor worries about political gridlock and what it could mean for President Donald Trump’s plans for health care reforms and other economy-boosting measures.

The euro was up 0.5 percent at a one-year high of $1.1373 with FX traders waiting for another flurry of ECB policymaker speeches at a conference hosted by the central bank in Portugal.

But the Japanese yen weakened 0.44 percent versus the greenback at 112.36 per dollar.

Oil prices fell in Asian deals after rising almost 2 percent to hit a one-week high on Tuesday amid a weaker dollar and short covering following recent steep losses.

Brent crude futures edged up slightly on the day to $46.66 a barrel. “So I would be long the euro on a tactical basis for the rest of the year”, JPMorgan Asset Management‘s Global Market Strategist, David Stubb, said.