|

Forex today: US yields new highs, dollar firm again, but are the US politics as stable?

Forex today carried over the Trump trade with optimism still building around tax reform while investors jumped back into stocks, driving the dollar higher by 0.2% in the DXY. However, there are some concerns that there may ot be enough support from the Republicans, so one to keep an eye on this week. 

The US 10yr treasury yields broke through the psychological 2.4% level from 2.37% lows to 2.42%, a fresh six month high. 2yr yields were also higher up 0.4%, travelling from 1.56% to 1.59% to make for a nine-year high. Markets are factoring in the Fed fund futures yields that offer a chance of a December rate hike at 99%. 

The other driver is Fed's Taylor who was drawn by the Republican Senate in a show of hands for the next Fed Chair. Taylor believes the administration can substantially lift non-inflationary economic growth through deregulation and tax changes, making for an easier and less expensive business climate in the US. Yellen’s current four-year term ends on February 3rd. what is key though, is that Taylor’s monetary policy rule calls for interest rates significantly higher and that is bullish for the US dollar. 

As for currencies, the EUR outperformed, rising from 1.1750 to 1.1793 despite the ECB coming up this week and a stronger dollar on the session. This was, however, a short-lived rally that was sold into leaving the single currency flat on the session. GBP has closed NY at 1.3114 as investors build their concerns that the UK economy is not strong enough for a rate hike; subsequently, the 55-DMA support at 1.3153 was broken, and that is significant with eyes now back to 1.3080 recent lows. The EUR/GBP cross was higher to 0.8975. 

USD/JPY tested back to the 114 handle from 113.40 with the Dow making fresh record highs. The Antipodeans have been pressured again, with the Aussie losing the 0.78 handle to score a low of 0.7771 and the Kiwi was still under pressure due to the new government’s policies, dropping to a five-month low to 0.6886. 

Key events ahead in Asia:

Analysts at Westpac noted that we have the Australian Q3 CPI data that is expected to rise 0.8% (core +0.5%). "Westpac sees a softer 0.7% for the headline and 0.3% for the core with broader pressures absent. Westpac’s headline forecast ex-energy (household electricity and gas) is 0.27%."

Key notes from US session:

Author

Ross J Burland

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

More from Ross J Burland
Share:

Editor's Picks

EUR/USD: Breakdown below trading range support near 1.1770 comes into play

The EUR/USD pair opens with a bearish gap at the start of a new week as the US-Iran war-led global flight to safety boosts the US Dollar. Spot prices, however, lack follow-through selling and manage to hold above mid-1.1700s during the Asian session.

GBP/USD targets 1.3500 barrier near moving averages

GBP/USD rebounds from the daily losses, trading around 1.3450 during the Asian hours on Monday. The technical analysis of the daily chart indicates an ongoing bearish bias, as the pair trades within a descending channel pattern.

Gold retreats from $5,400; still up over 1% amid Middle East tensions

Gold retreats from the $5,400 neighborhood, or its highest level since late January, touched in the Asian session on Monday, though it manages to hold above the $5,300 round figure. The bright metal opened with a bullish gap of about $17 and rallied toward the $5,400 level as Asian traders hit their desks and reacted negatively to the weekend news of the US and Israel attacks on Iran, rushing for cover in Gold.

Top Crypto Losers: Tezos, Toncoin, and Polkadot at crucial levels amid US-Israel strike on Iran

Altcoins such as Tezos, Toncoin, and Polkadot rank among the worst hit cryptocurrencies over the last 24 hours amid the US and Israel's attack on Iran. Tezos and Toncoin are down to crucial support levels while Polkadot remains near a crucial resistance trendline, showcasing underlying strength.

The market is paying for insurance, not apocalypse

As expected, this morning felt less like a Monday market open and more like a fire drill. Futures screens flickered red. S&P contracts down almost 1%. Nasdaq off 1.2%. Brent leaped 13% through $80. Gold rose 1.6% toward $5350 before paring some gains. The dollar is strutting mildly. The Swiss franc is quietly doing what it always does in a storm, catching some safe-haven flows.

Starknet unveils strkBTC, shielded Bitcoin transactions on Ethereum Layer 2

Starknet, the Ethereum Layer 2 network developed by StarkWare, today announced strkBTC, a wrapped Bitcoin asset that introduces optional shielding while preserving full DeFi composability.