In the past fortnight US Treasury yields across the maturity spectrum have oscillated in reasonably wide ranges, with the highs coinciding with the release on 13th July of US CPI-inflation data. The shape of the yield curve today is almost the same as it was on 8th July.

The US rates market has tentatively found its feet, for now at least — tentatively because volatility remains reasonably high both in terms of yield levels and yield spreads.

The pace of Dollar NEER appreciation has also slowed and volatility remains low while the S&P 500 and Brent crude oil price have…


Despite buoyant domestic expectations (or at least hope) football will not be coming home after the England football team lost on penalties to Italy in Sunday’s final of the Euro Championship but Sterling is arguably coming home, albeit slowly.

The GBP/EUR cross has this week traded mostly above 1.17, a level which has proven hard to break. GBP/EUR is up about 0.6% since late-June, in line with our modestly bullish view, and we expect further modest appreciation in the remainder of Q3 (see “Sterling leads Euro 1–0 at half-time in dull encounter but could extend advantage”, 29th June 2021).

The…


With England due to play Germany in the last-16 round of the Euro Championships in a few hours time, now is a good time to revisit the Sterling-Euro exchange rate.

Football fans will be hoping for a pulsating sporting encounter rich in history while traders will be hoping that the GBP/EUR cross, which is currently trading in the middle of a narrow 7-week range of only 1.4% and has exhibited very little volatility, will throw up some excitement of its own in the second half of the year.

Our core scenario is that the GBP/EUR cross will fall short of…


The Federal Reserve at its policy meeting on 16th June, whether inadvertently or by design, reset financial markets’ clocks.

The dust has since settled somewhat, with US short-end and long-end yields, the US Dollar and S&P 500 trading sideways for the past couple of sessions. When looking at the past month, hawks, doves, bulls and bears can all claim at least a partial victory.

The million Dollar question remains when the Federal Reserve will start tapering its asset purchases and hiking its policy rate. …


Time and time again in the past five weeks US Treasuries and the S&P 500 have sold off and the Dollar rallied in the wake of hawkish US surprises only for markets to quickly unwind these moves.

Volatility in US financial markets has ultimately remained subdued and directionality has been limited. In the month to 3rd June US Treasury yields rose only very marginally and the S&P 500 was broadly unchanged. Notably the Dollar NEER weakened a further 1%, suggesting that markets’ appetite to short the Dollar was not significantly curtailed by these bouts of inflation-concerns.

Moreover, quasi-dormant US financial…


US financial markets have had to contend with three “hawkish surprises” so far this month and on each occasion price action has been broadly the same. Initially the Dollar rallied, the S&P 500 sold off and US Treasury yields rose but these (modest) moves were very quickly reversed.

Volatility and directionality have thus remained limited, although the Dollar NEER has slowly weakened to within touching distance of a 3-year low — in line with our bearish Dollar outlook (see Dollar and the three bears, 19th April 2021).

Price action suggests that markets are still seemingly not convinced, rightly in our…


Treasury Secretary Yellen’s comments ten days ago were merely a temporary distraction. Perhaps more surprisingly, at first glance, the release on Wednesday of a much larger-than-expected increase in US CPI-inflation in April has not had much “sticking power”.

Core CPI-inflation almost doubled to 3.0% yoy (the high since December 1995) and as a result the Federal Reserve’s “real core” policy rate fell to a multi-decade low of -2.8%.

The range-bound 10-year Treasury yield subsequently closed 7bp higher at a 5-week high of 1.69%. The S&P 500 sell-off (-2.1%) and Dollar NEER rally (+0.6%) …


The past week has seen a short-lived flurry of market price action, with daily volatility in the US Dollar and equities edging higher on 30th April and again on 4th May. However, volatility overall has remained subdued, particularly in the benchmark US 10-year Treasury yield.

Moreover, the Dollar NEER and US 10-year yields — increasingly a bellwether for financial markets — remain firmly within their multi-week ranges while the S&P 500 yesterday closed in the middle of a narrow 3-week range of just 1.8%.

US markets are seemingly sitting on the fence at this juncture, unwilling to take material directional…


The Federal Reserve has in the past six weeks diligently stuck to its “patience until substantial further progress is seen” monetary policy mantra. Its “reward” has been range-bound US Treasury yields, a slowly depreciating Dollar and a metronomic rise in US equity indices, with all three financial markets exhibiting only modest volatility.

Since 19th April the Dollar NEER has depreciated a further 0.6% to within striking distance of a 14-week low, in line with “our core scenario that the Dollar will indeed lose further ground”. …


The US Dollar Nominal Effective Exchange Rate (NEER) traded in a narrow range of 1.8% between late-2020 and early March, according to our estimates. The Dollar then embarked on a 3–4 week rally, driven by rising US Treasury yields, the stretched valuations of other major currencies and still tepid global economic activity.

Since end-March the Dollar NEER has depreciated 1.8% to a 7-week low. Stronger US economic growth — fuelled in part by the government’s $1.9 …

Olivier Desbarres

Olivier Desbarres is Founder of 4X Global Research, providing substantive research and analysis on Emerging and G20 economies and fixed income markets.

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