The greenback continued to surrender ground against a number of counterparts yesterday as its yield attraction diminishes. The pound rose towards the $1.30 level while the EURUSD pair firmly established itself above the $1.12 handle in what was another risk-off day for financial markets.
The buck will continue to underperform while US government debt continues to be in high demand. The yield on 10-year US government bonds has fallen from 1.8% at the start of 2020 down to just above 0.80% this morning. Even with the emergency Fed cut earlier this week, pricing models are expecting another rate cut at the central bank’s next monetary policy meeting this month.
It’s likely the Bank of England follows suit. Interest rates are sitting at the 0.75% level at present and it would not be a surprise to see the BoE push them back down to 0.5%, possibly even down to 0.25%. The pound would likely take a hit on the latter move. The Bank meets at the end of the month with Andrew Bailey stepping in for his first meeting as governor.
Today is all about US non-farm payrolls. Expectations are for 175,000 jobs to have been added to the US economy in the month of February with the unemployment rate remaining steady at 3.6%. The greenback will certainly be the currency in focus heading into the final trading day of what’s been an exceedingly volatile week across global financial markets.
Have a great weekend.
Written by Viv Savani. 8:41am, March 6th 2020
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9:07am, March 9th 2020
Participants brace for another volatile week of trade