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US dollar tumbles as US Treasury bond yields fall to record lows

currency-newsUS dollar tumbles as US Treasury bond yields fall to record lows
The US dollar was driven lower on Thursday in response to a plunge in US bond yields.

The pound meanwhile, looks to be struggling this morning, with GBP/EUR subdued at €1.1516 and GBP/USD rangebound at $1.2972. GBP/CAD and GBP/AUD are flat at C$1.7362 and AU$1.9526 respectively, while GBP/NZD has tumbled to NZ$2.0380.

Coming up, the focus will remain on the US dollar today as markets await the highly influential US non-farm payroll figures.

What’s been happening?             

Thursday brought a sharp drop in the US dollar, with the safe-haven currency tumbling in response to a collapse in US Treasury bond yields.

As concerns over the economic impact of coronavirus grow, jittery investors sought safety in government bonds.

Putting further pressure on USD exchange rates was speculation that the Federal Reserve could cut interest rates again at its next policy meeting on 18 March, having announced an emergency cut of 50 basis points earlier this week in an attempt to limit the economic impact of the coronavirus.

Meanwhile, the slump in the US dollar mostly benefitted the euro during yesterday’s session, with the single currency strengthening as the European Central Bank’s (ECB) negative interest rates and the Eurozone’s large account surplus makes it attractive to traders amidst the ongoing coronavirus crisis.  

Finally, the pound was mixed on Thursday as the first round of trade negotiations between the UK and EU came to a close, laying bare the key differences between the two sides.

What’s coming up?

Looking ahead, we can expect the coronavirus to dominate market sentiment again today.

However, the publication of the latest US non-farm payroll report is also likely to prompt some movement in the US dollar, with another robust reading potentially helping the ‘greenback’ to recover some ground.

In Europe, the publication of Germany’s latest factory order figures could support the euro this morning after orders were reported to have skyrocketed by 5.5% in January, easily outpacing expectations for a more modest expansion of 1.5%.

For GBP investors, an absence of any notable economic data means the focus will remain on Brexit, where concerns over a possible no-deal Brexit are likely to limit any upside in the pound.
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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