Dollar Slips as U.S Treasury Yields Rise
The United States (U.S) dollar fell against its major trading partners early Monday at the start of a relatively light week that includes few major data points and no appearances by Federal Reserve officials.
Meanwhile, U.S. bond yields rose on Monday as upbeat economic data last week and a quiet period from the Federal Reserve set the stage for risk-taking as the week began, with stocks adding to Friday’s earnings-fueled gains.
Fed officials are in a quiet period ahead of the July 26-27 Federal Open Market Committee meeting, where a second straight 75-basis point rate increase is expected, but a 100-basis point increase has not been completely ruled out.
A quick summary of foreign exchange activity heading into Monday shows that USDCAD fell to 1.2974 from 1.3024 at the Friday US close and 1.3073 at the same point Friday morning. READ: FOREX: US Dollar Slips after Currencies Traders Take Profits
After a 100-basis point rate hike last week, the Bank of Canada’s next move at its Sept. 7 meeting is uncertain, but the BOC said in its post-meeting statement it will continue to act as needed.
Canada inflation data is scheduled for release on Wednesday, followed by retail sales on Friday. USDJPY declined to 138.209 from 138.508 at the Friday US close and 138.676 at the same time Friday morning.
Japanese markets are closed Monday for Marine Day and no economic data is being released. The Bank of Japan is expected to maintain an accommodative monetary policy stance at its meeting Wednesday and Thursday, particularly as rising COVID-19 cases add a layer of uncertainty.
USDEUR rose to 1.0152 from 1.0088 at the Friday US close and 1.0056 at the same point Friday morning. Trade deficits declined in Italy and Spain in May according to data released earlier Monday. The European Central Bank is expected to raise rates for the first time since 2011 at its meeting on Thursday.
GBPUSD rose to 1.1978 from 1.1852 at the Friday US close and 1.1841 at the same point Friday morning. There are no UK data scheduled for release on Monday. The Bank of England meets next on Aug. 4, when it is expected to maintain its tightening cycle with the possibility of a larger 50-basis point increase.
U.S. economic data on Friday showed stronger-than-expected retail sales, an uptick in consumer sentiment and lower inflation expectations. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was up 4.4 basis points at 3.179%.
The yield on 10-year Treasury notes was up 6.7 basis points at 2.997%. The yield on the 30-year Treasury bond was up 6.4 basis points at 3.159%. The gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at -18.4 basis points.
The breakeven rate on five-year U.S. Treasury Inflation-Protected Securities (TIPS) was last at 2.678%, after closing at 2.614% on Friday. # Dollar Slips as U.S Treasury Yields Rise
