The aussie pair jumped to the fresh high in three years while flashing 0.8008 as the peak the previous day as risks remained positive
during Asia and early European session. However, the jump in the
Treasury yields afterward joined strong US data to drag the quote to
0.7858 and mark the biggest drop since late September 2020.
Risks ignore vaccine, stimulus optimism…
Although Fed policymakers keep ruling out the latest surge in Treasury yields from the list of considerations for monetary policy
decisions, the bond market moves have been wild and dominant off-late.
Recently, the US 10-year Treasury yields refreshed yearly, currently
around 1.51%, top after the 7-year note auction put the cherry on the
top of the markets rush for risk-safety.
Treasury yields wild moves to the north ignore Fed officials‘ non-consideration for monetary policy decisions while taking clues from
the upbeat US data suggesting economic recovery and extra upside
pressure on the inflation. Among the released data, US Q4 GDP matched
upbeat market forecasts whereas the Durable Goods Orders and Jobless
Claims were also on the positive side. On the other hand, Australia’s Q4
Private Capital Expenditure (CAPEX) reversed -3.0% prior with +3.0%,
versus 0.0% forecast.
Qualitative catalysts to the risks were also positive as Johnson and Johnson came out with the update suggesting the strongest vaccine
for the coronavirus (COVID-19) after Pfizer and Moderna conveyed over
90% effective rates. Further, market chatters that the US policymakers
are on the move to vote the $1.9 trillion stimulus on Friday also
favored risks. Alternatively, China warned the US over its naval ships
that crossed boundaries in the South China Sea.
Against this backdrop, Wall Street benchmarks drop heavily with Nasdaq leading the south-run with a daily loss of 3.52%. The underlying
reason for equities rout could be traced to the plunge in the
tech-shares that mainly blame Treasuries.
Looking forward, Australias Private Sector Credit data for January will offer immediate direction but major attention will be given to the
US Treasury yields. On that side, talks surrounding the US stimulus and
PCE data will be the key to watch.
