The price of Brent crude oil reached the level of USD89.17 per barrel, setting a record high since October 2014.
The US dollar index (DXY) has weakened since the New York session yesterday to reach the 95.40s level again in the early European session this Thursday (20/January). US Treasury bond yields stepped back from record highs, while bond yields in several other countries actually climbed. Meanwhile, rising commodity prices strengthened the Canadian dollar and Australian dollar.
The US Treasury 10Y yield is currently at 1.845%, an inch behind a two-year record high of 1.902% hit yesterday. This correction is related to the mere market mechanism and not due to a change in expectations of a "Fed rate hike". The market still expects four Fed rate hikes in 2022.
A Reuters survey showed the median "Fed rate hike" forecast among 86 analysts was three times; starting from March and two more times until reaching a range of 0.75-1.00% by the end of 2022. However, half of the respondents said they expected four rate hikes.
Bond yields in other developed countries also rose in line with the increasingly tight outlook for their respective monetary policies, including in Canada, Australia, New Zealand, the UK, and the Eurozone. The 10Y Bund Yield even hit levels above 0% for the first time since 2019, strengthening the foundation of the euro exchange rate.
The Aussie and Loonie dollars were also supported by rising commodity prices, alongside good Australian employment and Canadian inflation data. The price of Brent crude oil on Wednesday reached the level of USD89.17 per barrel, its highest record since October 2014. Meanwhile, Newcastle coal and iron ore futures contracts are at their highest ranges since October 2021.
"Overnight commodity prices were a big mover for commodity currencies, but you still get the impression that Omicron's (COVID-19 variant) isn't going to have a lasting adverse impact on the global economic outlook," said Kim Mundy, senior economist and currency strategist. at the Commonwealth Bank of Australia.
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