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Summary
The full text of James Carville’s infamous remark-- “I used to think if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everybody.”—gets to the essential point. In a capitalist economy, the basic ingredient is money and the cost of funds. The bond market’s tempered view is likely to tell you more about economic probabilities than any other trading market. Equities have retained most of their post-election gains, the dollar and commodities have lost most of their Trump surge. The yield on the 10-year U.S. Treasury closed at 2.23 percent on Friday, much closer to the 2.61 percent post-election high that the 1.78 percent close on the Friday before the vote. Is this a judgment on U.S. economic prospects over the next two years? Or is it simply an acknowledgment that the Fed is embarked on a rate cycle and the 10-year yield is still less than half its 20-year average. What are the U.S. and global bond markets telling us about the health and future of the world’s economy?
Join us for the view from the world’s most powerful market.
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Editors’ Picks
EUR/USD trims losses, back to 1.1830
EUR/USD manages to regain some composure, leaving behind part of the earlier losses and reclaim the 1.1830 region on Tuesday. In the meantime, the US Dollar’s upside impulse loses some momentum while investors remain cautious ahead of upcoming US data releases, including the FOMC Minutes.
GBP/USD bounces off lows, retargets 1.3550
After bottoming out just below the 1.3500 yardstick, GBP/USD now gathers some fresh bids and advances to the 1.3530-1.3540 band in the latter part of Tuesday’s session. Cable’s recovery comes as the Greenback surrenders part of its advance, although it keeps the bullish bias well in place for the day.
Gold remains offered below $5,000
Gold stays on the defensive on Tuesday, receding to the sub-$5,000 region per troy ounce on the back of the persistent move higher in the Greenback. The precious metal’s decline is also underpinned by the modest uptick in US Treasury yields across the spectrum.
Crypto Today: Bitcoin, Ethereum, XRP upside looks limited amid deteriorating retail demand
The cryptocurrency market extends weakness with major coins including Bitcoin (BTC), Ethereum (ETH) and Ripple (XRP) trading in sideways price action at the time of writing on Tuesday.
UK jobs market weakens, bolstering rate cut hopes
In the UK, the latest jobs report made for difficult reading. Nonetheless, this represents yet another reminder for the Bank of England that they need to act swiftly given the collapse in inflation expected over the coming months.
Here is what you need to know on Tuesday, February 17:
Safe-haven flows dominate the action in financial markets early Tuesday as trading conditions normalize following the US holiday. The economic calendar will feature ZEW sentiment figures from Germany, the weekly ADP Employment Change 4-week Average data from the US and January inflation report from Canada.