Relief Day on Tuesday?

Equity indices are up 1% ahead of the London session, while the USD is seen quickly retreating from its cycle highs as traders are locking in profits after the recent massive rally.

BoE without intervention

The GBP/USD pair hit a historic low of 1.0317 before recovering above 1.08. It was anticipated that the Bank of England would intervene and aid the couple in recovering, but it did not. In fact, Governor Andrew Bailey reaffirmed that they would not hesitate to change interest rates as needed to sustainably bring inflation back to the 2% objective in the medium term and said that they are “closely watching” events in the financial markets. However, he said, the most recent events will be thoroughly evaluated at their upcoming planned meeting.

In other news, the Chinese yuan was one of the day’s few outliers, down 0.2% and trading just below a two-year low of 7.1699. Data revealed that Chinese industrial earnings decreased for a second consecutive month in August, amid ongoing interruptions from lockdowns connected to COVID. This led to losses in the currency.

Meanwhile, the Bank of Japan (BoJ) has initiated a new ad hoc bond-buying scheme. The central bank is willing to purchase Japanese Government Bonds for JPY 250 billion as Japanese bonds keep crashing, sending their yields sharply higher.

Later today, US durable goods are due, expected to decline notably in August, likely leading to further profit-taking in the USD. Additionally, the housing price index, along with new home sales for August, are on the agenda.