The return of Treasuries trading yesterday after the long weekend was the key development in broader markets. Higher yields drove the dollar higher and put together, that weighed on equities as well. The dollar rally even saw the currency rose to its highest levels this year against the yen, aussie and kiwi.
As for what is behind the heavy selling in Treasuries, it’s a tough one to figure out. The pragmatic side of me thinks this is similar to the flows that we saw in August, which owes to flows focusing on the flood of supply in the market. But right now, there’s no certain and easy answers to be honest.
10-year yields in the US are down slightly by 1.6 bps today to 4.251%, so that is at least offering a bit of a breather ahead of European trading. But it is still early in the day and we have to wait on US traders to really firm up trading sentiment on the day. One only has to look back to Friday for a reminder of that really.
Anyway, the dollar is now in the driver’s seat but is not running away with technical breaks against the currencies mentioned above.
USD/JPY daily chart
USD/JPY is the hot one to watch as it holds above 147.00 in a push to its highest levels since November. There is much room to maneuver between 145.00 and 150.00, so that lays out the technical potential. But be wary that we are also in intervention territory for the Japanese yen and today, we already got some verbal pushback on that here.
Elsewhere, we also saw both EUR/USD and GBP/USD slipped to their lowest levels in three months yesterday. For now, major currencies are mostly little changed on the day but there is no doubt that the dollar is in the driver’s seat, though the bond market is the one at the wheel.