Treasury yields turn more flat to start the European morning
Keep an eye on the bond market today
While most quarters of the market are still reeling from more optimistic headlines on the US-China trade front, bonds are hinting that there are bigger fish to fry in trading today.
The ECB decision is the main event to watch and the price action in bonds is telling us that. It may be a bit of a "nothing dip" but I reckon this is telling of what the market is currently focused on as we look towards the end of the week.
If you're wondering why gold hasn't been beaten down heavily by the more upbeat risk mood earlier, it's because gold is much more heavily tied to central bank focus these days than risk sentiment per se.
Just look at the correlation in price action between Treasuries and gold today:
Over the past week or so, the upside move in yields can be largely seen as a "retracement" to the sharp rise in bond prices in August. I reckon that may still extend until the Fed next week and then we may have to reassess the market landscape once again.
As such, the reaction to the ECB meeting decision will only tell half the story. The other half - and arguably more important one - depends on the Fed next week.