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The weakening of the US dollar on Tuesday turned out to be temporary. The jump in yields of government bonds of the US Treasury is supporting it.
Yesterday, the benchmark yield of the 10-year Treasury overcame an important psychological level of 3.0%, and although it corrected downwards by the end of trading in the US, this Rubicon was passed today, and at the time of writing, the yield is 3.011%.
What is "threatening" financial markets? For the US dollar, growth in yield is a supportive factor, as this increases its value due to the growing attractiveness of investing in less risky assets, such as placing money on bank deposits. Therefore, the probable continuation of the increase in the yield of government bonds will only support investors' interest in the US currency.
However, the attractiveness of the US stock market will decline in terms of its speculative appeal. This is due to the fact that the cost of money will grow and this will reduce the attractiveness of buying shares in US companies for borrowed funds. Based on this, you can expect that the US stock market is likely to continue to decline after the publication of corporate reporting.
We expect that the decision of the ECB on Thursday will be the announcement by the regulator that its future actions aimed at ending incentive measures will depend on the incoming statistical economic data and the dynamics of inflation indicators. If such a message is sounded and confirmed by the speech of ECB President M. Draghi, then the euro will most likely continue its decline. First of all, this will happen in tandem with the US dollar.
Forecast of the day:
The EURUSD pair remains under pressure on the eve of the ECB meeting. The US dollar gets support on the wave of growth in yields on US Treasury bonds. It is likely that after overcoming the level of 1.2200, the pair will resume the decline to the level of 1.2080.
The NZDUSD pair continues its vertical decline against the backdrop of a weakening in China's GDP growth. On it, additional negative influence is rendered by growth of yields of state bonds in the States. The pair escaped from the range in which it has been in the last few months. It is likely that it will continue to fall to 0.7020.
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