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FOREX: Rise in Yields Undermines AUD, GBP Firms on Trimmed '25 Rate Cut Pricing

FOREX
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  • US yields are rising further in early European trade, helping the 10y inch back to 4.42% for a new December high and narrow the gap with the post-election highs of 4.50%. As a result, the USD Index is seeing support and holds the 107.00 handle. The JPY outperforms, however, to be the strongest currency in G10 and drag USD/JPY off yesterday's highs at Y154.48.
  • Nonetheless, short-term momentum is clearly in favour of further upside, evident in the 50-dma rising through the 200-dma this week (marking the formation of a golden cross) for the first time since June 2023.
  • GBP is in favour Tuesday, as wages data released pre-market came in ahead of expectations and showed early signs of a reversal in momentum for private wages - posing problems for any MPC members that may have looked to vote for a rate cut at this week's BoE decision. As a result, markets further trimmed rate cut bets across 2025.
  • Antipodean currencies are trading poorly, falling against most others in response to firmer US yields. AUD/JPY has rejected the test of the 98.569 100-dma and slipped lower into NY hours.  
  • Focus for the Tuesday session ahead turns to the Canadian CPI release as well as US retail sales and industrial production stats. After a handful of ECB comments this morning, there are no further scheduled appearances from central bank members today, with the Fed remaining inside their pre-meeting media blackout period ahead of tomorrow's policy announcement.
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  • US yields are rising further in early European trade, helping the 10y inch back to 4.42% for a new December high and narrow the gap with the post-election highs of 4.50%. As a result, the USD Index is seeing support and holds the 107.00 handle. The JPY outperforms, however, to be the strongest currency in G10 and drag USD/JPY off yesterday's highs at Y154.48.
  • Nonetheless, short-term momentum is clearly in favour of further upside, evident in the 50-dma rising through the 200-dma this week (marking the formation of a golden cross) for the first time since June 2023.
  • GBP is in favour Tuesday, as wages data released pre-market came in ahead of expectations and showed early signs of a reversal in momentum for private wages - posing problems for any MPC members that may have looked to vote for a rate cut at this week's BoE decision. As a result, markets further trimmed rate cut bets across 2025.
  • Antipodean currencies are trading poorly, falling against most others in response to firmer US yields. AUD/JPY has rejected the test of the 98.569 100-dma and slipped lower into NY hours.  
  • Focus for the Tuesday session ahead turns to the Canadian CPI release as well as US retail sales and industrial production stats. After a handful of ECB comments this morning, there are no further scheduled appearances from central bank members today, with the Fed remaining inside their pre-meeting media blackout period ahead of tomorrow's policy announcement.