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US dollar pressured by soft US Treasury yields

Philip McHugh November 29th 2023 - 2 minute read

The US dollar trended lower on Tuesday as US Treasury yields held at a two-month low.

Meanwhile, trade in the pound is mixed at the start of today’s session, with GBP/EUR stable at €1.1556 and GBP/USD muted at $1.2696. GBP/CAD has dipped to CA$1.7217, while GBP/AUD ticks up to AU$1.9144 and GBP/NZD slumps to NZ$2.0597.

Coming up, will a slowdown in German inflation pull the euro lower this afternoon?

What’s been happening?

The US dollar ticked lower against the majority of its peers during yesterday’s session.

The weakness of the ‘greenback’ appeared linked to soft US Treasury yields, which sank to their lowest levels in over two months.

It’s likely that the continued drop in yields is being driven by recent speculation that the Federal Reserve is gearing up to start cutting interest rates next year.

Meanwhile, the euro edged higher on Tuesday as it was supported by a stronger-than-expected German consumer confidence reading.

At the same time, the pound firmed yesterday. The uptick in Sterling was supported by growing confidence that the Bank of England (BoE) won’t begin cutting interest rates anytime soon.

What’s coming up?

In the spotlight today will be the publication of Germany’s consumer price index.

November’s preliminary CPI figures are expected to report another cooling of inflation, this time from 3.8% to 3.5%.

Another cooldown in inflation in the Eurozone’s largest economy is likely to weaken European Central Bank (ECB) interest rate expectations and could pull the euro lower today.

For USD investors the focus will be on the latest US GDP estimate. Confirmation of a strong expansion of the US economy in the third quarter may help to revive USD demand as it would suggest there is no rush for the Federal Reserve to begin cutting interest rates.

Finally, with UK data still in short supply the pound may struggle to find direction through today’s session.

Written by
Philip McHugh

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