Analysis: New COVID scare sparks rate rethink in markets

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LONDON, Nov 26 (Reuters) – Risks of a new COVID hit to economic activity are clobbering expectations for rate hikes next year from the world’s major central banks, a potential setback for the dollar and other currencies where wagers had been most aggressive.

Money markets no longer fully price a 25-basis-point interest rate rise by the Federal Reserve by June 2022, nor are they positioned for a full 10-bps hike from the European Central Bank by the end of 2022, as they were just a few days ago.

And the chances of the Bank of England raising rates next month are seen around 53%, from 75% on Thursday.

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Those shifts come after the detection of a new coronavirus variant in South Africa triggered stricter border controls from several governments, as scientists sought to determine if the mutation was vaccine-resistant. read more

“While central bank commentary has been focused on upside risks to…

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