USD Strengthens on Higher US Rates, Hawkish Fed Talk

Note  The table above is updated before publication with the latest consensus forecasts. However, the text charts are prepared ahead of time. Therefore there can be discrepancies between the forecasts given in the table above and in the text charts. 

Rates as of 0500 GMT

Market Recap

The dollar was generally stronger in a riskoff environment. US yields continued to rise in a market thats still substantially short dollars.

Tenyear yields rose another 3bps to 1.15, their highest level since the pandemic began, as the market adjusted to the prospect of further fiscal stimulus and possible tapering of the Feds quantitative easing bondbuying program. The yield curve steepened further. 

Recent comments by Fed officials show that theyre relatively optimistic on the economy, at least for the second half of the year, and some might even consider tapering their bondbuying program then. I do think youre looking at a second half that is going to be very strong Richmond Fed President Barkin V said yesterday. Asked about the possibility of Fed tapering its asset purchases in the second half, Atlanta Fed President Bostic V said, Im open to that. A lot of it will depend on how the virus and the vaccine distribution goes. But if it goes well if we learn quickly I think there is some good upside potential.

The view isnt unanimous of course. Fed Vice Chair Clarida V Friday said he doesnt expect the Fed to begin tapering this year despite an expected strengthening of the…

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