Forex Market Majors Weaker as Treasury Yields Rise

  • Dollar Strengthens on Higher Yields
  • ECB Concerned About Slow Vaccine Rollout
  • Markets Set to Dip After Huge Run

The US Dollar regained some strength in the forex market today against other major currencies. This comes as Treasury yields look set to recover once again to above 1.6%. This move combines with the general ongoing weakness of the currency has seen the Euro dip back below $1.19 as the vaccine rollout in the bloc was further criticized as being too slow. Meanwhile, on Wall Street, markets look set to dip slightly at the opening bell after back-to-back positive days.

Higher Yields Power Dollar

Treasury yields have started to point upwards again in the US with the 10-year moving back above 1.6%. This same move provoked a sharp market sell-off in recent weeks as those in forex trading, and particularly equities began to grow concerned about the possibility of inflation. This worry was positively deflated this week to date.

The yields moving higher though is typically accompanied by a strengthening USD. This is exactly what we have seen so far today with both the Euro and GBP losing some ground. The move higher comes off the back of President Biden’s first national address yesterday where he pointed to encouraging signs and a hope that America can get back to a sense of normality by Independence Day with all adults eligible for vaccinations very soon. He also signed the $1.9 trillion stimulus package into law just prior to the address.

Europe Struggles to Get Vaccine Out

Meanwhile, in Europe, the challenges for both the currency and the overall economic stability of the region continue to persist. These challenges come in the form of a very slow vaccine rollout which has been criticized by members of the ECB as it encounters new roadblocks like a lack of willingness to take up the AstraZeneca vaccine from many. They are concerned about reports linking the jab to blood clots but at the same time, delivery of the recently approved Johnson & Johnson vaccine has been very slow.

Atop of this, stronger yields would appear to hamper the Eurozone economy and add to already disappointing growth forecasts. Despite this, the ECB announced no significant plans to change or extend their bond-buying PEPP program even though there have been some calls to do so.

Markets Set to Open Lower After Mega Gains

While forex brokers have been feeling the strain, stock trading on Wall Street has been booming in the last two days. The major US indices and many companies within them have reached new record highs after record highs. A big-tech bounce back was accompanied by a surge in value names too.

This looks certain to slow down slightly today with the increasing treasury yield again very much in focus and 1.6% seems to be the number that turns off many stock buyers at the present time. With that said, the market should still easily end the week on a positive number.

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