Global Themes

USD gains as bond yields plunge

The US dollar climbed on Friday as international bond yields plunged in a potential sign of a slowing global economy.

The US Federal Reserve’s cautious statement on Thursday was initially seen as a positive for markets but growing concerns about the state of the US and global economies sent US ten-year bond yields to the lowest level since 2017.

The move in US yields saw three-month bond yields move above ten-year bond yields as parts of the US yield curve became more inverted.

An inverted yield curve – when short-term rates are above long-term rates – is sometimes seen as sign of a potential recession although the inversion is more commonly identified between the two- and ten-year yields.

Safe havens in favour

The USDSGD gained 0.3% as it neared one-week highs.

The Japanese yen was much stronger as weaker sharemarkets encouraged a move into the “safe haven” markets.

The British pound was stronger ahead of a major Brexit vote this week.

Brexit vote

The Brexit story continues this week with the UK likely to face another parliamentary vote on Theresa May’s Brexit deal.

The European Union has now said the UK can remain in the EU until 22 may if they vote for May’s deal. If the deal fails, the UK needs to come up with an alternative by 12 April.

Otherwise, commentary from the US Federal Reserve, fourth-quarter US GDP and the Reserve Bank of New Zealand will drive markets this week.

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