Today the focus is on selling Swiss francs and yen. But the forex markets are heterogeneous. The commodity currencies are slightly more resilient than the Australian, but the major pairs are simply limited in a very narrow range at the time of writing. Euro, pound, and the dollar are currently mixed. But the picture may change dramatically in the next session.
The resumption of the sell-off in US shares may cause some acceleration of the downward movement. Meanwhile, comments from Fed Chairman Jerome Powell on recent yield changes will be studied.
The American dollar soared as US Treasury yields reached fresh one-year highs following words from Federal Reserve’s head, Jerome Powell. As he repeated several times, he noted that they are “a low way” from their goals. Regarding rates, he said that the outlook is becoming more positive, but remarked that “sustained” progress towards the Fed’s goals is needed for policymakers to change the current monetary policy.
When asked about the recent run in yields, Powell said that they would be worried about “disorderly market conditions,” but repeated that they won’t hike rates until inflation runs above 2% for some time.
The Japanese yen hit a seven-month low against the dollar on Thursday as hopes that vaccine spread and additional government stimulus would lead the US economy to a solid recovery lifted the dollar and drove Treasury yields.
But rising benchmark yields could weigh on Asian equities as investors wary of last week’s government bond sell-off that spiked yields, scaring equity markets and triggering a fall in Equities. By early Thursday, Australian stocks were down 1% and E-mini S&P futures were down 0.25%.
US stocks fell overnight as investors sold high-tech stocks to focus on other sectors likely to benefit from the economic recovery. Investors’ attention to the economic recovery was not diminished by data released the previous evening, which showed that the US labor market was having a hard time in February when the number of jobs in the private sector grew less than expected.
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