Pullback in US bond yields: 27 April US Dollar Trading Outlook


The pullback in the US bond yields does not impact on the US Dollar as it breaks to new highs towards the end of the week keeping the rest of the majors under pressure. However, how might the US GDP impact the greenback? Learn this from the 27 April US Dollar Trading Outlook.

27 April, ADS Securities – The US currency continues to dominate attention this week after a brief respite yesterday in light of the ECB meeting and Mario Draghi’s press conference.

Nevertheless, the Dollar resumed its ascent as soon as the US markets opened for trading and posted fresh gains but one thing we want to highlight this morning is the divergence between the price action in the greenback and the retreat in the US Treasury yields.

Pullback in US bond yields: 27 April US Dollar Trading Outlook

The 10-year notes’ yield pulled back below 3% during yesterday’s session but the decline was not followed by a correction in the Dollar Index which actually pushed higher as we already discussed. This divergence can not be sustained for long though so we should soon see these metrics converging in a common direction; the key question, of course, is which direction will that be?

Fresh data from the US today might provide the answer and with the US GDP on the docket the risk is to the downside; a softer reading on the back of weaker consumer demand and durable goods orders could drive the Dollar lower before the end of the day. 

However, we don’t expect anything more than a small correction- if any – for the greenback today in light of next week’s Fed meeting that should keep the Dollar underpinned as traders are hoping for a positive tune from the US central bank.

Euro still remains bearish

Shifting our focus to the European majors, the Euro is still on a bearish trajectory. The shared currency suffered most of the pain inflicted by Dollar’s fresh push yesterday even though the ECB event turned out more positive than expected. Mario Draghi sounded upbeat and unfazed by the recent deterioration of data in the Euro area and instead focused on the positives.

However, the Single currency was not able to hold on to its initial gains and declined further to trade at 1.21 this morning as Draghi’s rhetoric was not enough to convince traders that are worried by the slowdown in Europe’s performance.

The broader momentum for the Euro points lower and even though we might see a small bounce higher today if the Euro remains below 1.2150 then more losses should be expected towards the 1.2080 area.

European Equities Markets

Equity traders enjoyed a stellar day yesterday as all the global stock indices ended the day above water and the London opening is expected to be equally positive. European futures are trending higher this morning and even though the US markets are indicating a marginally bearish bias the momentum is currently to the upside.

The pullback in US bond yields allows stock traders to breathe easier but it still remains to be seen whether we will see a further correction or a fresh move above 3% that will put equities under pressure again.

ADS Securities Risk Disclaimer

This article was provided by ADS Securities analysts.

Trading foreign exchange, foreign exchange options, foreign exchange forwards, contracts for difference, bullion and other over-the-counter products carries a high level of risk. Hence, it may not be suitable for all investors.

All opinions, news, analysis, prices or other information contained in this communication are provided as general market commentary. It does not constitute investment advice. Nor a solicitation or recommendation for you to buy or sell any over-the-counter product or another financial instrument.

    Share Your Opinion, Write a Comment