We’re seeing a return back to the Wednesday moves as traders are continuing to weigh the US Treasury decision to double long-term debt buybacks this week. While there is a good argument that the relief bought may be a short-term solution, that is not to say that the signaling will be so quickly undone.
Bessent doubled down with some verbal intervention yesterday and that continues to reaffirm their conviction in wanting markets to follow their signal.
And amid some key technical breaks in dollar pairs (as well as gold), we’re seeing that continue to run in the final stretch of the week. EUR/USD is up 0.2% to 1.1705 with buyers slowly inching towards a key test of 1.1800 down the road. Meanwhile, USD/JPY is down 0.4% to 158.48 and nearing another test of its 200-day moving average at 158.29 again. And we also have GBP/USD, which is trading to fresh six-month highs with the pair up 0.2% to 1.3660 levels:
A firm break of the May highs here will open up the path towards a potential retest of 1.3850 next.
But as mentioned before, the run lower in the dollar will have to come alongside a further retreat in Treasury yields. And after a bit of a rebound overnight and earlier today, we’re seeing things fizzle a little.
10-year yields in the US moved up to around 4.71% before falling back to 4.685% currently while 30-year yields merely pushed up to around 5.25% before falling back to 5.235% today, not yet returning to the highs around 5.33% earlier in the week.
In essence, traders and investors do realise that there is a “Bessent put” in play. And with yields nudging back up a little just before slipping again, it shows that market players are well aware of the state of play.
Looking elsewher, equities are also looking for a slight bounce with S&P 500 futures up 0.3% while gold is continuing to capitalise with the precious metal up 1.5% to $4,584 currently.
This article was written by Justin Low at investinglive.com.