Kantox currency update: dollar dives as the US yield curve inverts
The US dollar has extended losses and retreats further from recent highs, weighed by the decline on US treasury yields after the US Federal Reserve affirmed last week that interest rates are near the neutral level, suggesting a pause on the monetary tightening pace.
The US 5-year bonds yields fell yesterday below the 3-year note, which means that the yield curve has inverted. For the first time in 10 years, investors are paid more for shorter-term US government debt than for longer-term one, a sign widely perceived as an accurate predictor of recession.
EUR/USD returns to 1.1400 resistance area. The euro bounced up at 1.1300 lows on Friday and has regained lost ground, favoured by the recent dollar weakness, to return to last week highs at 1.1400. As at London market opening times, the EUR/USD is trading at 1.1375.
GBP/USD: one-month lows at 1.2700. The sterling was unable to benefit from dollar weakness and extended losses on Tuesday, to hit one-month lows at 1.2700, with the market focusing on the Parliament vote on the Brexit deal. As at London market opening times, the GBP/USD is trading at 1.2780.
USD/JPY dives to one-week lows at 113.00. The dollar failed to break above 114.00 resistance area last week, and the pair dropped sharply on Tuesday’s Asian reaching one-week lows right above 113.00. As at London market opening times, the USD/JPY is trading at 113.05.
In the Calendar Today
Today we have a very thin calendar ahead of a rather interesting end of the week. the only event worth mentioning will be BoE Carney’s testimony to the Treasury Select Committee on the impact of the Brexit deal. His comments might have a relevant impact on the pound.
09:15 GMT BoE: Governor Carney’s Testimony