Should we be watching the balance of power between the U.S. and Europe?

Should we be watching the balance of power between the U.S. and Europe?

07.04.2021

Yesterday, in a sharp reversal from the previous day, a risk-off sentiment took hold, characterized by falling stock prices, a weaker U.S. dollar, and lower interest rates. The decline in U.S. long-term interest rates—which had been rising recently—was particularly notable. Bonds were bought, with the yield on the 10-year U.S. Treasury note falling to 1.66%, and the 5-year U.S. Treasury note yield dropping to 0.87%. Crude oil prices remained flat, while gold traded around $1,730.

While cross-yen pairs had been trending higher recently, the USD, CAD, and GBP have been trending lower. The GBP/JPY pair, which had recently reached 153.4, has fallen by about 170 pips to 151.7. In contrast, the EUR/JPY pair has held its ground and is trading around 130.2.

No major economic indicators are scheduled for release in Europe today. However, the following releases are scheduled: the U.S. MBA Mortgage Applications Index at 8:00 PM, the Canada-U.S. Trade Balance at 9:30 PM, and remarks by Chicago Fed President Evans at 10:00 PM.remarks, at 23:30 the U.S. weekly crude oil inventories, at 01:00 the U.S. remarks by Barkin, President of the Richmond Fed, at 02:00 the U.S. remarks by Daly, President of the San Francisco Fed, and at 03:00 the release of the U.S. FOMC minutes.We will closely monitor how the U.S. dollar reacts to today’s release of the FOMC minutes.