EUR/USD: Limited upside as Europe continues to lag in vaccination roll-out – MUFG
|The US dollar has rebounded fuelled first and foremost by the rebound in US Treasury bond yields. Vaccine woes and US-China news also help the greenback, per MUFG Bank.
Key quotes
“The fragility of the UST bond market could reflect the probable expiry of the suspension of a rule that includes UST holdings and reserves in the calculation of a bank’s supplementary leverage ratio. This rule was suspended when the COVID crisis hit but is due to expire at the end of the month. The reinstatement of the regulation means some banks may need to reduce UST bond inventories. A surprise extension of the suspension could have a bigger impact on pushing yields lower.”
“US-China tensions have picked up with the US announcing further restrictions on certain US companies in relation to supplying 5G parts to Huawei Technology Co. USD/Asia has derived some support from this news.”
“The news that Italy, Denmark, Norway and Iceland have suspended the use of the AstraZeneca vaccine due to health concerns is not good news. Take-up of AstraZeneca is going to suffer further and could start to impact take-up overall and investors will inevitably push back further the timing and/or the extent of the recovery in the euro-zone relative to the US and the UK. Further reason to remain cautious over the extent of upside for EUR/USD over the short-term.”
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.