Forex news from the European morning session - 18 March 2021
Headlines:
- Steeper for longer, what is the Fed hinting at?
- WHO Europe director: The benefits of AstraZeneca vaccine outweigh any risks
- Eurozone January trade balance €24.2 billion vs €29.0 billion expected
- Germany reports 17,504 new coronavirus cases, 227 deaths in latest update today
- ECB's Lagarde: Yields increase is getting ahead of the economic recovery
- ECB's Lagarde: Step-up in PEPP will become more visible over time
- Nasdaq futures dumped as Treasury yields surge higher
- Long-end Treasury yields climb above pre-Fed highs
- Switzerland February trade balance CHF 3.70 billion vs CHF 5.05 billion prior
Markets:
- AUD leads, CHF lags on the day
- European equities higher; S&P 500 futures down 0.5%
- US 10-year yields up 10.6 bps to 1.749%
- Gold down 0.9% to $1,729.30
- WTI down 0.3% to $64.44
- Bitcoin up 0.5% to $58,024
The calm in the bond market didn't even last a day as Treasuries sold off heavily with the Fed giving the green light for the yield curve to steepen after the FOMC meeting.
The move came rather swiftly, as 10-year Treasury yields surged higher from 1.67% to 1.75% - the first time it hit that level since January last year.
In turn, the jump in yields helped to see bids flow into the dollar while equities saw a heavy rotation out of tech. Nasdaq futures are down by about 1.8% at the lows going into North American trading.
EUR/USD was pushed lower from 1.1980 to 1.1934 and inches closer towards a test of its 100-hour moving average @ 1.1930.
GBP/USD kept more steady after a drop from 1.4000 to 1.3945 to stick around 1.3960-70 levels as the pound positions for a potentially more hawkish BOE at the top of the hour.
USD/CAD moved off three-year lows from 1.2370 to keep around 1.2420 now, though sellers are still comfortably in near-term control. The 100-hour moving average is seen @ 1.2461 and is the key near-term level to watch in the pair.
Meanwhile, AUD/USD trimmed gains from 0.7840 to just below 0.7800 after the aussie had gained on a more upbeat jobs report in Asia Pacific trading.
Elsewhere, gold fell by 1% at the lows in a drop from $1,750 to just under $1,740 as sellers are threatening to try and seize near-term control as well.
It is all about the bond market again as investors are starting to test the Fed's resolve once more after the central bank laid down the challenge yesterday.
The magnitude of the surge higher today is starting to spook risk assets but with the Fed sticking to its lower for longer (and now also steeper for longer) talk, it might not take long for equities to stabilise unless Treasuries capitulate altogether.
