Stock markets ticked higher in the Asian session as on US fiscal stimulus optimism.
Solid demand for 10-year notes in the latest monthly auction could limit US Dollar ’s gains.
US Dollar Index (DXY) price remains in a Descending Channel.
The prospect of an accelerated vaccine distribution and additional fiscal stimulus package from the Joe Biden administration is lifting sentiment.
Australia’s ASX 200 edged higher 0.11% after upbeat local employment figures and Japan’s Nikkei 225 surged 1.04%. In FX markets, the safe haven US Dollar fell versus its major peers.
Looking ahead, US December inflation figures Eurozone industrial production release for November will be in focus.
Strong Treasury Demand Could Limit USD Upside
Solid demand for US 10-year treasuries at the monthly auction limited the recent ascent in yields seen in recent days, and could hamper the Greenback’s recent rebound versus major counterparts.
Bond prices have dropped significantly so far this year as investors price in additional and substantial fiscal support from the Joe Biden administration. The price decline is also a reaction to comments from several Fed members that the central bank could taper its QE program.
However, this seems unlikely given that the minutes from the December’s FOMC December meeting said that that the central bank will continue purchases. “until substantial further progress has been made towards the Committee’s maximum employment and price stability goals”.
Furthermore with demand in the Treasury’s recent $38 billion 10-year note auction at its highest levels since December 2019the Fed unlikely to adjust the rate of its bond purchases
