USD and treasury yields better bid amid speculation about hawkish shift at the head of the Fed
|The US dollar bounced back on Monday, extending gains against almost all of its peers. The uncertainty generated by the Catalan situation has also forced traders to pull out of the single currency. Over the last few months, the euro had won the favour of investors at the expense of the greenback, amid rising uncertainty in the US political outlook as well as lacklustre economic data. Now that Republicans seemed that have found a common about the much awaited tax reform, investors are more optimistic about the inflation and growth outlook in the world’s largest economy.
Last Friday, the release of disappointing PCE readings had only little effect on the investors’ optimism as both US treasury yields and the greenback quickly bounced back. The US 10-year sovereign rate rose to the highest level since July 11th, hitting 2.364%, while the dollar index returned to 93.60 after falling to 92.95 last week. One must be said that the speculations surrounding a potential shift at the head of the Federal Reserve, with the possible removal of Janet Yellen for a more hawkish candidate such as Kevin Warsh, has fuelled the yield rally.
Stay on top of the markets with Swissquote’s News & Analysis
We maintain our bullish on the US dollar as we believe the market hasn’t fully priced the upcoming rate hike together with the balance sheet reduction program, yet. However, we would stay cautious regarding further EUR weakness against the USD as another push, which can the take the form of a worsening of the Catalan situation, is needed.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.