Yields

It's not every day you see gold plunge alongside yields. But that is what Monday served on reports of a potential ceasefire in Gaza and Trump's picking a relatively 'safe pair of hands' for the US Treasury Secretary role. With a prominent swing high on gold, I suspect it could be headed much lower from here.

The expected 25 cut was delivered. But the Fed were understandably cautious regarding future cuts, given they don't know which or how many of Trump’s inflationary policies will see the day of light. And that means the current pullback on the USD and yields could be limited.

With Trump leading in some polls and Fed members continuing to push back against a faster pace of easing, bond traders were quick to send yields and therefor the USD higher. USD/JPY now has 152 within sight.

AUD/USD was sent lower for a fifth day while Wall Street indices fell and the VIX rose during a risk-off start to the week.

AUD/USD finds itself with a typical day's trade of 69c ahead of Australia's CPI report, while the USD index seriously considers a break of 100.

If the 2-year yield is right, it suggests the USD could be set to rise over the near term. And I suspect that PCE inflation could be the trigger. For now, risk off tones are in the air.

A surprise rise in US wage pressures weighed on sentiment on the eve of the Fed meeting, sending the US dollar broadly higher, Wall Street lower as AUD/USD suffered its second worst day of the year.

Momentum turned higher for the US dollar on Friday and the US 2-year is reconsidering a break above 2%, which could see them close the gap with the CRM commodities index - which have led both markets higher this year.

The Nasdaq may have risen on Wednesday, but it appears driven by a pullback in yields. And if yields rally from a key level of support, it could propel USD/JPY higher and weigh on the Nasdaq.

Bondcano, the phrase coined to described the sharp acceleration of bond yields to the detriment of equities, appears to be smouldering as yields have pulled back from their highs. It has certainly provided some relief for sentiment, given the well-based concerns that something was about to break in the financial system. But with the Fed members now striking a relatively dovish tone, it raises the question as to whether bond investors will now step back into the market to capitalise on attractive yields and take the sting out of bondcano’s tail.

EUR/USD is on track for a record 12th consecutive losing streak. But given its hesitancy to test 1.04 and the potential for a false break of the January low, perhaps we’re finally nearing an inflection point for the battered EUR/USD.

US bond yields pulled back to give risk assets a reprieve from their selloff on Wednesday. But with bond market implied volatility also pulling back, perhaps there's a little more room for a bounce for the Nikkei and S&P 500.

The bond rout and sharp rise in yields continue to take centre stage for sentiment. And the longer this trend persists, the greater the odds appear for indices to finally roll over. Given three key US indices are showing signs of stability around their respective support levels, it brings the potential for a minor bounce over the near-term. But if bond yields keep rising, any such bounce could prove futile for bulls.

The US yield curve has continued to creep higher after the 3-day weekend in the US, heling the US dollar retain its place at the top spot among currency majors. Yet WTI crude oil is managing to outpace the dollar, and looks set for at least another attempt to test the $90 level.

It is also worth noting that the 2-year yield printed a bearish engulfing week after a failed attempt to break and hold above 5%. And if yields continue to move lower over the coming weeks, it will likely weigh on the US dollar. Large speculators are slowly loosening their bullish grip on GBP/USD futures, with short exposure rising by 25% last week. Traders are also showing renewed bullish interest in gold and silver.

When bond markets move, investors in other markets always take notice

Watching US 10-Year Yields and USD/JPY could give a clue as to the next direction for mortgage rates.