Yields rise on optimistic FOMC outlook, dollar gains strength again

This is what you need to know to trade today Thursday 6 January:

The dollar suffered losses against its main rivals during the first half of Wednesday, but made a sharp U-turn in the US session yesterday with rising US Treasury yields. The DXY dollar index continues to rise at the beginning of the European session on Thursday as investors evaluate the Minutes of the December meeting of the FOMC. Destatis will release preliminary December inflation data for Germany. Later in the day, weekly US unemployment claims will be released alongside the November Goods Trade Balance and the December ISM Services PMI.

Minutes from the FOMC’s December monetary policy meeting revealed Wednesday that authorities expect balance sheet normalization to begin sooner after the first rate hike than last time. “Some participants also pointed out that it might be appropriate to start reducing the size of the Federal Reserve’s balance sheet relatively soon after starting to increase the federal funds rate,” the publication read. With the initial market reaction, the 10-year US Treasury yield rose to its strongest level since March before continuing to push higher toward 1.75% early Thursday.

CME Group’s FedWatch tool shows that markets are pricing in a 68% probability of a 25 basis point rate hike in March. The optimistic outlook weighed heavily on US stock markets, with the S&P 500 losing nearly 2% on Wednesday. Additionally, S&P futures are down 0.5% at time of writing, suggesting that the stock sell-off could continue after the opening bell.

The EUR/USD he wiped out a large chunk of his daily gains in the second half of the day on Wednesday and was last seen testing 1.1300. Investors are likely to remain focused on US Treasury yields.

The GBP/USD It touched its highest level in nearly two months at 1.3600 late Wednesday, but reversed its direction. Right now, the pair is trading in negative territory below 1.3550.

The USD/JPY It capitalized on rising yields and closed above 116.00 on Wednesday. The risk averse market environment is helping the yen to show some resilience against the dollar and the cross is posting small losses below 116.00 early Thursday.

The oro it rose to $ 1,830 before the FOMC minutes, but ended up closing the day in the red at $ 1,809 under pressure from rising US bond yields. XAU / USD remains on the defensive and continues to target $ 1,800.

The downward pressure around the Bitcoin has strengthened after the FOMC release and BTC was last seen trading at its weakest level in a month at $ 43,000. The Ethereum it continues to decline after losing more than 6% on Wednesday and is trading below $ 3,500 for the first time since mid-October.