Buck Holds BId in Quiet Market

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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 US yields continued to rise.

The EURUSD fell through the 1.1200 level before rebounding slightly while USDJPY rallied to 108.96 before backing off the big figure as US 10Y yields continued to rise hitting 2.07% in overnight trade.

The FX trade these days is almost entirely dependent on US yields and the question for the market going forward is whether US yields have made an 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 USDJPY 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

Boris Schlossberg
Managing Director

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