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  4. USDEUR reached four-month high, EUR continues the downward trend, and Treasury yields on the decline

USDEUR reached four-month high, EUR continues the downward trend, and Treasury yields on the decline

  • USD up and Treasury gradually declines from top
  • US factory activity picked up in March with strong growth in new orders
  • Euro falls to four-month low despite strong PMIs

USD was up on Thursday morning in Asia, reaching a four-month high against EUR. Few days ago, both Yellen and Powell testified to the Congress that the market has not yet shown the warning sign for the intervention. They are confident about the economic recovery and investors should not worry about inflation risks. From the talk, it is quite clear that the Fed does not plan to further loosen its policies, and this has helped cool down the sellout on Treasury bills a little bit. Following the talk, auctions on the two-year and five-year bills both met with robust demand on Tuesday and Wednesday. Strong demand has led to retreat in yields; the 5-year yield dropped 1.55% and the closely watched 10-year yield also moved 0.85% lower. This week we will also see the auction on the 7-year bill.

On the macro front, factories activity in the US picked up in early March amid strong growth in new orders, although supply chain constraints still limit the growth momentum. From IHS Markit data released on Wednesday, we see that manufacturing PMI increased to 59 from 58.6 in the prior month. A reading above 50 indicates growth and manufacturing accounts for 11.9% of the US economy.

EUR has reached its four-month low against USD, lowest since last November. Investor sentiment towards EUR has been quite weak, to such an extent that impressive PMI data released on Wednesday did little to help with the currency. France, Germany and the Eurozone in general all showed strong growth, highlighted by Germany’s 66.6. EUR is also under pressure over a vaccine dispute – shortage on vaccines has led the EU to block shipments to the UK, likely arousing tensions between them.