The bond market is in the driver’s seat and traders don’t seem to want to wait for the Fed next week. The 10-year Treasury yield is now at its lowest since June of last year and the 2-year yield is threatening to go even higher on the charts now:
Monthly chart of US 2-year Treasury yields (%)
Things are certainly heating up this week, and the move is being reflected in the broader markets. The USD/JPY pair has now dropped another 1% to break above the 141.00 level, with the December low at 140.24 and then the 140.00 level in focus. This latter level is a very important psychological level to watch, so pay attention to it.
Meanwhile, US futures also fell, with S&P 500 futures down 0.5%.
That’s pretty much how things are going ahead of European trading right now. Looking ahead to the session ahead, there won’t be much on the agenda that will affect the ongoing proceedings. We do have the UK monthly GDP data, but that’s a minor release, all things considered.
As such, trading sentiment will continue to focus on bond flows and how that plays into broader market sentiment. With demand for Treasuries back on track, the dollar could weigh on the balance. But with risk also tilting to the softer side, it may not spill over to Australia.
These will be some key considerations before we get to the US CPI report later today.
0600 GMT – UK monthly GDP figures for July
1100 GMT – US MBA Mortgage Applications September 6
That’s all for the upcoming session. I wish you all a great day ahead and good luck with your trading! Stay safe out there.
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