The dollar is hitting session lows across the board as Treasury yields fall and the risk mood improves. I wrote yesterday about the changing dynamics
The dollar is hitting session lows across the board as Treasury yields fall and the risk mood improves.
I wrote yesterday about the changing dynamics in the market and that’s in play today. There’s a shift back-and-forth between the market pricing in higher US rates (dollar bullish) and better global growth (dollar bearish). Today it’s the latter as market cools on the risks around the Fed hiking rates to 6% and cheers on better corporate earnings.
Eyes are on bonds today with US 10-year yields down 4.6 bps and 30s down 6.3 bps ahead of a $21 billion 30-year reopening. Yesterday’s 10-year note sale was extremely strong, pushing down yields. The market didn’t react at first but it’s sensing strong demand for fixed income again today and that’s part of what’s weighing on the dollar.
S&P 500 futures are also up 31 points, or 0.7%, in a reversal of most of yesterday’s decline. Notably, the dollar has given back more than yesterday’s gains and is at the lows of the week against GBP, AUD, NZD and JPY.
AUD/USD is an interesting one for me as it breaks the 50% retracement of the recent drop. I don’t love a Fib here but it lines up after a little head-and-shoulders top and as we break the Jan 30 low, which was acting as resistance. The 61.8% level would take out the old H&S neckline and signal a return to the high. Given the series of higher lows this week, that’s a decent bet.
On the fundamental side, it also aligns with better estimates of growth and the RBA shifting to a more-hawkish stance.
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