The dollar boosted US bond yields, which strengthened in line with optimism for a Fed Rate hike next month. In contrast, EUR/USD fell despite positive ZEW investor confidence data.
The US dollar skyrocketed in the trading session Tuesday (18/January) this evening, lifted by the increase in US Treasury bond yields. The US Dollar Index was up 0.50% to 95.73, extending a three-day rally to a one-week high.
Ahead of next week's FOMC meeting, the US 2-year bond yields rose significantly to 1% for the first time since February 2020. Meanwhile, the US 10-year bond yield touched 1.856% tonight.
Market participants expect that the Fed will signal a stronger rate hike in March. If so, then this will be the first rate increase since the Corona virus pandemic. Fed Fund Futures has even anticipated 4 interest rate hikes in 2022.
Yields tend to soar as investors prepare for the possibility of the Fed being more hawkish than expected. "The strengthening of the US dollar occurred due to the fact that the market has moved on the possibility of the Fed tightening monetary policy much faster than expected," commented Chester Ntonifor, analyst at BCA Research in Montreal.
However, Ntonifor noted that the continued strengthening of the US Dollar will only last for about 3 to 6 months. This is because the position of the US Dollar will be speculative this year. "As long as investors think the Fed will be one of the more hawkish central banks in 2022 in raising interest rates, then there will be an inflow into the dollar on a speculative basis," Ntonifor added.
EUR/USD Drops Despite Positive German ZEW Confidence Data
On the other hand, the Euro became the most depressed major currency versus the US Dollar tonight. At press time, EUR/USD is down 0.66% to 1.1329, its lowest since January 6. The slick German ZEW Investor Confidence data released this afternoon was not strong enough to restrain the Euro from the dollar's bullish brunt.
Germany's January ZEW Economic Sentiment shot from 29.9 to 51.7, the highest since the last five months. German investors expect that COVID-19 cases will decline in early summer. They are optimistic that Germany's economic growth will also recover along with the decline in COVID-19 infections.
Post a Comment for "US Dollar Up Half Percent, Euro Slaps "