US Dollar Price Forecast: Unfazed Fed, Real Yields To Undermine EUR/USD
US DOLLAR, FEDERAL RESERVE, US REAL YIELDS, EUR/USD, EUROPEAN CENTRAL BANK – TALKING POINTS:
- Equity markets stabilized during the APAC session as the recent selling in the bond market subsided.
- Climbing real yields, and a relatively unfazed Federal Reserve may open the door for USD to gain ground against its major counterparts.
- EUR/USD is at risk of extended losses after collapsing back below the 100-MA.
ASIA-PACIFIC RECAP
Equity markets dipped marginally lower during Asia-Pacific trade as the relentless selling in global bond markets subsided. Australia’s ASX 200 slid 0.74%, Japan’s Nikkei 225 dropped 0.23%, Hong Kong’s Hang Seng Index fell 0.06%, and China’s CSI 300 slipped 0.11% lower.
In FX markets, the cyclically-sensitive CAD outperformed as crude oil prices surged above $64 a barrel, alongside the haven-associated USD and CHF. Gold and silver prices drifted lower despite yields on US 10-year Treasuries holding relatively steady.
Looking ahead, the US non-farm payrolls report for February headlines the economic docket alongside Canadian trade balance date from the month of January.
UNFAZED POWELL SENDS YIELDS SOARING HIGHER
As mentioned in previous reports, a lack of regard from Federal Reserve Chair Jerome Powell surrounding the relentless sell-off in US Treasury markets would probably send yields higher, and in turn strengthen the US Dollar. That is indeed what happened overnight, with Powell’s comments underwhelming market participants and resulting in yields on US 10-year Treasuries spiking to the highest levels since February 2018.
When asked about the rise in longer-term rates, Powell stated that it “was something that was notable and caught my attention” but failed to hint at any impending action from the central bank. Instead, the Chairman reiterated that the Fed is still a “long way from our goals” and will be patient in assessing when the right time will be to eventually begin tapering monetary policy measures.
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