Forex news from the European trading session - 22 February 2021
Headlines:
- Bitcoin falls 8% back below $53,000 after Elon Musk's weekend comment
- Germany's Merkel reportedly seeks four-stage plan to ease lockdown restrictions
- UK PM office says conditions to ease lockdown are being met, so first step will proceed from 8 March
- Ifo economist says that German economy looking towards upswing
- Germany February Ifo business climate index 92.4 vs 90.5 expected
- SNB total sight deposits w.e. 19 February CHF 704.4 bn vs CHF 704.3 bn prior
- Reminder: UK PM Johnson to set out plans to exit lockdown later today
- Germany reports 4,369 new coronavirus cases, 62 deaths in latest update today
Markets:
- NZD leads, JPY lags on the day
- European equities lower; E-minis down 0.7%
- US 10-year yields up 4.4 bps to 1.381%
- Gold up 0.5% to $1,793.80
- WTI up 1.1% to $59.86
- Bitcoin down 6.2% to $53,821
It was a quiet but choppy session for FX as traders had to digest some push and pull in the dollar and risk mood amid yet another selloff in the bond market.
Although breakevens continue to keep calmer, 10-year Treasury yields surged higher to 1.39% and is keeping thereabouts - with real yields also creeping higher today.
10-year real yields in the US is now up to -0.79%. For some context, it was just -1.02% on 12 February so that is a 23 bps jump in a little over a week in the market.
Equities are feeling some pressure as such, with European indices keeping lower and US futures also slipping by over 1% before trimming declines slightly on the session.
The dollar was weaker initially but pushed higher at the start of European morning trade as risk sentiment softened, thought it failed to hold those gains and is now lower.
EUR/USD fell from 1.2120 to 1.2091 before leaning on its 100-hour moving average to push back up to 1.2144 near daily resistance around 1.2150.
GBP/USD dropped from 1.4020 to 1.3981 but is now back closer to unchanged levels.
Meanwhile, USD/JPY pushed higher from 105.60 to 105.85 but has now fallen back to 105.50-60 levels and trading back in between its key hourly moving averages.
Despite modestly higher oil prices, USD/CAD is keeping higher but off earlier highs of 1.2650 as it holds around 1.2630 levels at the moment.
AUD/USD also eased from 0.7880 to 0.7860 as the dollar firmed earlier on but has now moved back to opening levels ahead of North American trading.
Elsewhere, copper continues to run hot while gold is benefiting slightly from a broader bid in the commodities space to start the new week.
Yields, yields, yields. That's the name of the game now and we'll see how that impacts the broader market in the coming sessions, with Fedspeak and a vote on Biden's stimulus plan set to be among the key events to watch this week.
In any case, a broader pullback in risk trades or equities after a strong rally in February is likely to set the stage for dip buying eventually - especially if central banks feel the need to reaffirm their dovish policies and keep yields in check moving forward.
