U.S. Treasury Yields boost the greenback

4 October, 2018

The U.S. Treasury selloff on Wednesday was the biggest story in the financial markets.  This time it wasn’t only the rate-sensitive two-year yields that marched higher. Yields across the curve all saw significant spikes with the 10-year rates jumping above 3.2% for the first time since May 2011, while the longer term 30-year yields traded at the highest level since 2014 reaching 3.37% at the time of writing.

It wasn’t the fear of fiscal deterioration or trade war that drove the action in U.S. fixed income markets but was instead the growth story leading the move. The report from ADP showed private payrolls increasing by 230,000 in September, easily beating the expected 185,000 figure. Then came the release of the ISM’s non-manufacturing index showing that growth in the U.S. services sector hit a record high.

While most economic data from Europe, UK, China, and the rest of the world have mostly surprised to the downside, the U.S. economy seems to be firing on all cylinders. This would likely continue to support a higher dollar in the near term and won’t be a surprise to see the dollar’s index breaking above August highs of 97. Some investors may want to wait for a confirmation from Friday’s non-farm payrolls report before adding to their bullish positions. Given that the employment component of the non-manufacturing ISM report rose to a record high, and ADP figures beat expectations by 45,000 jobs, I expect to see also a stronger than anticipated NFP.  However, I will be more interested in the wage growth figure as another surprise to the upside will fuel expectations that inflation will run above the targeted 2% and the Fed may need to tighten policy faster than previously projected.

Although robust economic growth signs were behind the rally in U.S. Treasury yields, the question remains: can U.S. equity markets continue challenging the rise in interest rates?  From yesterday’s reaction, it was evident that S&P 500 bond proxies were the first to be hit, with Utilities and Consumer Non-Cyclical stocks declining 1.22% and 0.92% respectively. With valuations still elevated compared to historic levels, it requires an upbeat earnings season for stocks to maintain their bullish momentum, but the risks are growing with borrowing cost on the rise and fixed income markets looking very attractive.  


Source link  
China stimulus extends correction

A solid kick off for the U.S. earnings season, Theresa May surviving a vote of no-confidence, China's central bank pumping record liquidity, and policymaker assurances...

Rally losing momentum

Investors have kicked off 2019 in a positive mindset. The S&P 500 rallied during 5 out of the past 6 trading days booking 3.1% gains so far...

Equities recover on trade optimism

After a terrible end to 2018 which saw global equities plummet, markets are finally seeing the color green returning to their screens. U.S. stocks built...


Optimism creates illusion of stability

The first trading week of 2019 has been explosively volatile and highly unpredictable due to persistent concerns over slowing global economic growth...

Stock markets resume rollercoaster ride

The final trading week of 2018 has been explosively volatile and wildly unpredictable due to geopolitical risks. Global sentiment repeatedly...

Risk-off sentiment intensifies

It has been a painfully bearish trading week for global equity markets as fears over slowing global growth weighed heavily on investor sentiment.


Dollar rebounds after Fed rate hike

In a widely expected move, the Federal Reserve has raised its key interest rates by 25 basis points for the fourth time this year. However, the central...

EM currencies gain ground on weak USD

Emerging market currencies have entered the final full trading week before Christmas on a positive note despite fears over plateauing global economic...

Yuan firms on trade talk hopes

A sense of stability returned to financial markets on Tuesday as investors swept aside geopolitical risk factors to focus on progress in trade talks between...


In the past 24 hours Bitcoin has gained 0.8% and reached $3666.27778223. Open your trading account with the best cryptocurrency brokers on special terms today.

In the past 7 days the EUR/USD pair has gained 1.5351% and is now at $1.1563. Start trading and making money on Forex today.

In the past 7 days Ethereum has lost -3.75% and is now at $123.213701749. Have the most popular cryptocurrencies compared online 24/7.


Top Brokers offering Forex Market Analysis



Forex Currencies Forecasts



Top 10 Forex Brokers 2019

# Broker Review
1easyMarketseasyMarkets91%
2FXTMFXTM87%
3HYCMHYCM86%
4FxProFxPro84%
5FIBO GroupFIBO Group83%
6OctaFXOctaFX82%
7HotForexHotForex81%
8FXCMFXCM80%
9XMXM72%
10FP MarketsFP Markets69%
  


Share: