Daily Currency Update

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US bond yields push demand for USD

USD - United States Dollar

A surge in US Treasury yields yesterday, which nearly touched 1.5%, drove momentum for the US dollar yesterday. Investors left equity markets, likely taking big wins, and looked for alternatives. They found bonds and commodities as a promising perspective. As US treasury yields hit 1.48% percent, and commodities were demanded, the US Dollar Index picked itself up from a 7-week low. This morning, the US Dollar Index was up two thirds of a percent.

Key Movers

Yesterday saw another day of profit taking from investors as they reaped the benefits of the surge we have seen in the pound. As a result, GBPUSD dipped back below 1.40 and GBPEUR saw a return towards 1.14. There has been a suggestion among some analysts that the pound is once again resembling an emerging market currency. But with relative political certainty at the moment (vs all the Brexit uncertainty during '19/'20) this assessment is harsh. The pound is certainly volatile as of late. It rose from the depth of GBPUSD 1.32 and GBPEUR 1.09 from December, but the moniker of emerging market currency is unjustified.

The Australian dollar’s advance was halted after recent momentum propelled it through 0.80 US cents for the first time in 3 years. Reflation expectations continue to facilitate gains across commodity currencies, while broader US dollar weakness has amplified the weeks upturn. While the RBA is likely to pine for a lower AUD, the current market narrative will make it very difficult for policy makers to arrest and reverse the current trend.

Expected Ranges

EUR/USD: 1.209 - 1.223 ▲

GBP/USD: 1.389 - 1.410 ▲

AUD/USD: 0.771 - 0.794 ▲

USD/CAD: 1.252 - 1.269 ▲