Monex: Dollar higher due to rising US bond yields and risk-off mode markets

Monex: Dollar higher due to rising US bond yields and risk-off mode markets

2 maart 2021

Valuta
Dollar.jpg

This is a commentary by Ima Sammani, FX Market Analyst at Monex Europe.

USD

The US dollar trades firmly on the front foot this morning after a mixed session yesterday. Monday saw the dollar trade in the middle of the G10 pack as developed market yields retraced recent gains after the Reserve Bank of Australia signalled it would purchase more longer-dated securities. However, this morning, normal service has seemingly resumed within the developed market fixed income space. The greenback is enjoying the environment of rising yields and downwards pressure on equities as it fuels a risk-off environment.
 
EUR

The euro started today’s session in the red against the US dollar to mark an extension to the two-day EURUSD decline. Yesterday’s European Central Bank data showed a slowdown in bond purchases from €17.2bn to €12bn over the last week, however, markets reacted only mildly to the news as the recent rhetoric by the ECB on rising yields has caught the markets' attention. The central bank has repeatedly voiced concerns about the recent sell-off in eurozone sovereign debt markets, with Philip Lane stating last week asset purchases “will be conducted to preserve favourable financing conditions over the pandemic period”. This led participants to believe the ECB will increase the pace of its emergency bond purchases to counter the bond rout. Yesterday’s comments by policymaker Francois Villeroy de Galhau reinforced this view, as he stated the ECB “can and must react against'' any unwarranted rise in bond yields that threaten to undermine the eurozone economy.
 
GBP

Sterling is under pressure again from a resurgent US dollar this morning as rising yields return to markets after taking a breather yesterday. The pound’s price action is nothing striking as it trades inline with the euro against the dollar, resulting in a flat GBPEUR cross this morning. With tomorrow’s budget keenly eyed by investors, sterling is unlikely to deviate from the pack when trading against the broad US dollar today. 

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