FINAM FOREX: Growth in US Treasury yields supported the US dollar


17 February 2021

Anna Zaitseva, analyst, FINAM Group

On Wednesday, February 17, EUR / USD is down 0.15% to 1.20860, while the DXY dollar is up 0.22% to hit 90.688. A day earlier, the single European currency weakened against the dollar by 0.21% to the level of 1.21024, while the DXY index rose slightly to close at 90.503.

The US dollar appreciated following the rise in the yield on US Treasury bonds. Thus, the yield on 10-year bonds jumped on Tuesday to 1.311%, which was the maximum value in almost a year. This is largely due to the rise in energy prices, which, coupled with large-scale measures of fiscal support for the American economy, can provoke a surge in inflation. At the same time, market expectations of inflation growth have not yet raised concerns among the FRS representatives. According to yesterday’s statements by the head of the Federal Reserve Bank of San Francisco Mary Daly, in the face of high unemployment, inflation risks are not something to think about right now. Instead, it is necessary to focus on programs to support people who are still unemployed due to the crisis. Daly also noted that the current course of the Fed’s monetary policy looks quite justified, and a premature increase in interest rates could lead to an aggravation of negative trends in the economy.

With regard to macroeconomic statistics, yesterday in the eurozone were released data on GDP for the IV quarter. According to the second estimate, gross output decreased by 5% (y / y) against a 4.3% (y / y) decline in Q3, which turned out to be 0.1 pp higher than the preliminary estimate.

In addition, preliminary data on changes in employment in the eurozone became known. Thus, the indicator fell by 2% (y / y) in the 4th quarter against a 2.3% (y / y) decline in the 3rd quarter and the consensus forecast of -2.2% (y / y).
Also in the eurozone and Germany were published data on the index of economic sentiment ZEW. In the eurozone, the February value of the indicator was 69.6 points compared to 58.3 points a month earlier, while analysts had expected a decline to 57 points. In Germany, the index rose from 61.8 to 71.2, the highest in the past five months and beating the consensus of 59.6.

Today, important indicators for the eurozone will not be published, and the US will release data on retail sales, producer price index, industrial production, the volume of inventories, and the minutes of the last meeting of the Federal Open Market Committee of the Federal Reserve will be published. Also on Wednesday there will be speeches by a number of representatives of the ECB and the Federal Reserve.

EUR / USD rate tested the level of 1.2150 and turned down. Stochastic lines are located near the overbought zone in a favorable position for selling, which speaks in favor of a decline in quotations in the short term.

This information is not investment advice.

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