Market Drivers July 9, 2019
- Dollar rally resumes
- US yields creep higher
- Nikkei 0.14% Dax -1.10%
- UST 10Y 2.06%
- Oil $58/bbl
- Gold $1387/oz.
Europe and Asia:
- No Data
North America:
- No Data
It’s been another news-free night in FX as the economic calendar remained empty, buy the buck saw a small bid in Asian and early European trade as U.S. yields continued to rise.
The EUR/USD fell through the 1.1200 level before rebounding slightly while USD/JPY rallied to 108.96 before backing off the big figure as U.S. 10Y yields continued to rise, hitting 2.07% in overnight trade.
The FX trade these days is almost entirely dependent on U.S. yields and the question for the market going forward is whether U.S. yields have made intermediate exhaustion low under the 2.0% mark last week. If the Fed Chair testimony tomorrow suggests that the Fed is much more inclined to do a “one and done” rate cut at the end of July, then yields should continue to rebound towards the 2.15% – 2.25% level as the summer progresses taking USD/JPY towards 110.00.
However, Fed Chair Powell faces enormous pressure from the White House to continue easing, so the market will watch for any signs of political accommodation which in turn will send the greenback lower once again.
For now, the market remains essentially at a standstill with volatility suppressed both by summer doldrums and lack of clarity on the policy front. Still, the consensus view is that the forward curve may have priced in too much easing and rates will continue to rebound providing a steady bid for the buck, but tomorrow’s testimony could prove to be the key catalyst for dollar movement either way.