quick look
- The dollar rose to a two-month high due to strong US economic data.
- Strong jobs report and Fed Chairman Powell's comments favor patience on interest rate cuts.
- The rise in the dollar affects the yen, euro, pound sterling and Australian dollar.
- Dollar index reaches 104.17, with Fed rate cut expectations revised.
- US Treasury yields rose, highlighting market expectations of higher US interest rates.
The dollar's rise to a two-month high signals a major shift in trader sentiment, as recent US economic data defies previous expectations of strong interest rate cuts from the Federal Reserve. Following an unexpectedly strong US jobs report and Federal Reserve Chairman Jerome Powell's comments indicating patience before cutting interest rates, the currency landscape has seen a dramatic shift. This combination of strong job growth and the central bank's dovish rhetoric has pushed US Treasury yields higher, further strengthening the dollar.
The yen and euro decline with the dollar surpassing 104.17
The effects of the dollar's rise were felt around the world, with the Japanese yen falling to its lowest level since early December at 148.82 yen to the dollar before stabilizing at 148.43. Likewise, the euro fell to $1.0762. This was its weakest point since mid-December, highlighting the widespread impact of US economic indicators and the Fed's policy outlook. The dollar index's rise to 104.17, a level not seen since December 11, reflects a reset of market expectations. These expectations went from expecting cuts of about 150 basis points to approximately 120 basis points during this year.
Sterling and Australian dollar weaken as Treasury yields rise: over two years at 4.445%
The adjustment in Fed rate cut expectations affected not only major currencies, but also other currencies such as the British pound and the Australian dollar, underscoring global sensitivity to shifts in US monetary policy. The British pound saw a slight decline to $1.2612 despite revised unemployment rates in Britain. Meanwhile, the Australian dollar fell to $0.6501 after touching a low of $0.6487, highlighting the interconnectedness of global financial markets. In addition, the increase in US Treasury yields, especially the rise in the two-year yield to 4.445% after an 18 basis point jump on Friday, indicates that the market is preparing for the possibility of US interest rates rising over an extended period.
Dynamic adjustments in currency values and Treasury yields underscore the critical role of US economic data and Federal Reserve policy directions in global financial markets.
