Market Information Wednesday 21 September 2022

The euro was still trading around parity on Tuesday ahead of the Federal Reserve’s (Fed) interest rate decision, to be announced Wednesday evening. With a possible 100 basis point rate hike on the horizon, it remains to be seen whether that level can be maintained. “It looks like that for now,” currency trader Stéphane van der Meer of currency broker Ebury told ABM Financial News on Tuesday. “To start with, only 20% of the market believes the Fed will raise interest rates by 100 basis points. We keep it at 75 basis points. In addition, the market is initially still looking forward to European Central Bank President Christine Lagarde’s lecture, which could hardly ignore the pressure to adopt a ‘hawkier’ tone. If the president heeds that, it could mean support for the euro,” according to Van der Meer.

Dutch consumer confidence decreased further in September. This was revealed on Wednesday by figures from the Central Bureau of Statistics (CBS). Consumer confidence was at -59 in August, down from -54 in July. At -59, consumer confidence in September was well below the 20-year average of -9. “Consumers have never been so negative about the economy and their financial situation,” CBS stated. The sub-indicator economic climate decreased from -74 to -79. Not since measurement began in 1986 have consumers been so gloomy about the economy. Consumers were both more negative about the economy in the past 12 months and about the economy in the next 12 months. Willingness to buy decreased to -46 in September, from -41 in August. Consumers have never been so negative about making major purchases.

Market interest rates are rising rapidly. In the Netherlands, the effective yield on 10-year government bonds increased to over 2.24% on Tuesday. This passed the peak in June. The yield is now at a level not seen the since summer of 2013. The ECB is expected to raise the deposit rate to at least 2.5% by the end of the first quarter of 2023. Currently, Frankfurt is still applying a rate of 0.75%. The money market has now priced in eight steps of 25 basis points between now and mid-March. On Tuesday, the Swedish central bank already set an example by implementing a one-full percentage point rate hike in one go.

The 6M Euribor increased with 7 basis points to 1.74% compared to previous business day. The 10Y Swap increased with 11 basis points to 2.69% compared to previous business day.

In the attachment, today’s market data on money and capital market rates as well as other rates are presented.