The push higher is helped by higher bond yields on the day, with 10-year Treasury yields up 3 bps to 4.021% at the moment. Traders are paring back some of the aggressive rate cut bets in general. Here’s a look at the change in the totality of rate cuts priced in for this year from last week until now:
- Fed: ~156 bps > ~136 bps
- ECB: ~161 bps > ~146 bps
- BOE: ~141 bps > ~ 126 bps
- BOC: ~120 bps > ~112 bps
- RBA: ~53 bps > ~38 bps
- RBNZ: ~93 bps > ~93 bps
Market players are certainly pulling back on the aggression and that has seen bond yields move higher as well this week. The reversal of the sell the dollar, buy everything else mood in November and December is also what continues to keep the dollar firmer on the week.
And the greenback is once again higher today as well. EUR/USD is now nearing 1.0900 as the technical picture starts to potentially lead towards a stronger retracement:
EUR/USD daily chart
The pair is down 0.3% to 1.0907 and looks to eye a test of minor trendline support (white line) at around 1.0860.
GBP/USD is also down 0.1% to 1.2660 and AUD/USD down 0.2% to 0.6690 on the day currently. Meanwhile, USD/JPY is up 0.3% as it looks to keep a push above 145.00 at the moment.
Despite the early moves, it is all still to play for before the weekend as we do have the US jobs report coming up later. That will be the main decider for any action in markets to wrap up the week. A stronger set of numbers there will give the Fed added flexibility to keep rates higher for longer if need be.