EUR/USD: Bond auction stacks the deck against the dollar

EUR/USD is rising as the ancient logic of buying low, selling high seemed to work in bond markets, this time with a substantial impact on the dollar. Looking ahead, Washington's fiscal impasse, vaccine hopes and jobless claims are in play, FXStreet’s analyst Yohay Elam reports.

Key quotes

“Investors sold off US treasuries ahead of the massive $38 billion auctions on Wednesday, pushing bond yields higher and boosting the dollar. Once Uncle Sam issued that debt at a relatively high yield, traders piled into bonds, pushing yields lower and taking the air out of the dollar.” 

“The US coronavirus situation is better than it used to be but is improving at a snail's pace. The old continent is better positioned.” 

“The burning issue in Washington is the impasse on Capitol Hill – Democrats and Republicans are still ‘far apart’ on reaching an accord on the next fiscal relief package. Federal Reserve officials have been urging lawmakers to act, raising their rhetoric.” 

“Despite concerns about the US economy, investors are optimistic about a vaccine, as efforts are accelerating – especially after Russia's controversial announcement about developing immunization. The S&P 500 briefly hit a new high on Wednesday, and the risk-on mood is pushing the safe-haven dollar down.”

“Later in the day, weekly jobless claims will provide an updated view of the US economy. Applications dropped sharply last week after several weeks of worries. Another upbeat figure could help the greenback recover, but nothing is certain.”