After a dramatic surge in the US Dollar, Treasury yields are soaring and driving further gains. The question now is how low can EUR/USD go if this upward trend continues?
Will it hit new lows or find stability before then?
Stay tuned to follow the fortunes of these two currencies as uncertainty reigns over their future direction!
Overnight, the US Dollar soared as Fed presidents and governors chimed in with hawkish comments. Boston Chief Susan Collins set the tone by emphasizing that interest rate hikes could be necessary to combat inflation – if economic data pointed towards it.
Jobless claims met expectations which further boosted investor confidence; an optimism deflated slightly when Atlanta’s Raphael Bostic said rates might level off come summertime but should rise gradually for now.
Christopher Waller capped things off by showing support for actions depending on ongoing financial indicators available at any given time.
Treasury yields have experienced upward momentum in recent weeks, reaching a 12 year peak.
The overnight index swap and futures markets are indicating that the Federal Open Market Committee (FOMC) will increase rates by 25 basis points at its next three meetings – up from 4.90% earlier this year to potentially as much as 5.5%.
With 2-year bonds soaring above their July 2007 record of 4.94%, and 10-year notes comfortably perched over 4%, it looks like rates may be headed even higher soon!
After taking a hit in the previous day’s trading session, the DXY index made a comeback into New York close. However, strength has waned slightly while Asian markets have opened.
The US Dollar is weighted heavily against 6 major currencies–the Euro making up 57% of its value and the Japanese Yen constituting another 13%.
As inflation rises across Europe for February 2021 to 0.8%, far surpassing expectations at 0.5%, it appears that central banks such as ECB are now attempting to play catch-up with respect to tightening their policies amidst increasing rates of rising prices throughout these regions worldwide.
The OIS market could be on the verge of a major shift with the European Central Bank’s upcoming meeting in two weeks, potentially leading to more hikes.
However, investors will also want an eye out for San Francisco Fed President Mary Daly and especially Federal Reserve chair Jerome Powell next week when he makes his semi-annual Monetary Policy Report address before the Senate Banking Committee one that promises to have seismic reverberations across global markets.
EUR/USD dropped under 1.0600 yesterday but is beginning signs of recovery as anticipation continues to build.
DXY vs. Treasury
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