US 10-Year Treasury Yield Rises Sharply, Dollar Bounces
The yield on the United States (US) 10-year Treasury note moved towards 3.8%, bouncing sharply from an over one-month low of 3.7% hit in the prior session as uncertainty regarding the Fed’s rate path spooked bond investors.
Louis Fed President James Bullard and San Francisco Fed President Mary Daly were among the latest policymakers to throw some cold water in expectations of a sooner-than-expected pause in the central bank tightening cycle.
Mixed signs from the US economy, with retail sales posting for incredible resilience from US consumers despite macro headwinds, added to uncertainty about the Fed’s next move.
Dollar bounces as U.S. economy sends mixed signals
Meanwhile, the US dollar rose on Thursday as investors digested mixed U.S. economic data, while the British pound fell as the UK government unveiled its latest budget update. READ: Dollar Trades Strong as U.S Treasury Yields Rise Sharply
The greenback has tumbled in recent weeks as inflation data and comments from Federal Reserve officials have suggested that the central bank can soon slow the pace of its punishing interest rate hikes. The euro was down 0.63% against the dollar at $1.033 after hitting its highest level since July at $1.048 on Tuesday.
The dollar index DXY, which measures the currency against six major peers, rose 0.66% to 106.98. The index has fallen more than 6% since hitting a 20-year high in September, although it remained 11% higher for the year on Thursday.
“Markets have positioned for the Fed to pivot (but) the U.S. retail sales data very much challenge that narrative,” said Commonwealth Bank of Australia currency strategist Kim Mundy. Simon Harvey, a senior FX analyst at Monex Europe, said the dollar was consolidating as investors try to work out the direction of the U.S. economy.
“The positive consumption data suggests we don’t have a hard landing coming (for the economy). But is that positive for risk assets or will it embolden the Fed to go harder?” he said.
The British pound, which was already trading lower, fell slightly as UK finance minister Jeremy Hunt tighter public spending in an effort to restore the country’s economic reputation and cool inflation.
It was last down 0.98% to $1.179 in a move that one analyst said was largely driven by sentiment about the dollar. The euro EURGBP was up 0.38% against the pound at 87.59 pence.
Traders will also scrutinise speeches from numerous Fed officials on Thursday for hints about rate hikes. The Fed has already hiked interest rates from next to zero in March to a range of 3.75% to 4%.
The greenback rose 0.49% against the Japanese yen on Thursday to 140.28 after falling earlier in the session. It plunged 3.7% on Thursday last week when U.S. consumer inflation data for October came in lower than expected. #US 10-Year Treasury Yield Rises Sharply, Dollar Bounces