Forex Marketz Daily Forex News – Fully Markets Update
Points to consider in this article:
- Euro sees gains, the AUD/USD and NZD/USD fall on risk-off trading.
- US Dollar could rally if we see three and six month Treasury yields rise. There is a 2 year bond auction coming up as well.
This week has a very quiet economic calendar that will affect the Forex and financial markets. This will put the focus on an upcoming round of Federal debt auctions, in the United States, well within the spotlight. Traders will be looking at the yields of these auctions to gauge how the new monetary policy is transmitting after the recent Federal Reserve Board’s decision to liftoff and raise its headline interest rate. In other words, how does that translate into real world borrowing costs? That will be in focus this week.
We have seen the prevailing yields on short term paper (another word for bonds and debt) beginning to top out in the last two bond sales. This offers an interesting analogies of maturities that began with the last paper sale before the Fed met in December. These rates are supposedly reflecting a dovish rhetoric on future rate hikes which came after the first rate hike in a decade. We saw a two year paper sale in November. Rates rose to 0.848 percent. This was the highest rate level in six years.
What we are seeing is tightening in the short end and a push higher in the two year note. This indicates that the markets have come onboard with the Fed’s plan to hike rates at a gradual pace. This also indicates that traders are upping bet between the widening monetary policies of the Fed to its G-10 counterparts. This should give a boost to the US Dollar.
We saw anti-risk Forex pairs, like the EUR/USD and USD/CHF move higher in Asian trading today. Risk-off currency pairs like the AUD/USD and NZD/USD Forex markets moved lower. There was also weakness in the Asian equity markets this morning. Equity prices opened higher, moved lower intraday and set a very risk-off feeling throughout the Asian and Pacific Rim markets.
