Data Turn Afoot?
The upward move in Treasury yields on Tuesday seemingly without any strong fundamental drivers has left markets perplexed. Regardless, the dollar was forced to respond higher in kind, though when price action is fixed-income led the pain is more acutely felt in high-beta risk currencies such as AUD and in Emerging Markets. Pre-positioning ahead of Wednesday’s release of auction sizes for longerdated paper aside, we believe it is valid for investors to once again look at the prospect of a decent data run pushing an earlier tapering back on the agenda. Such a phase would not only justify the Fed’s apparent lack of pessimism in the recent FOMC meeting, but also provide the dollar with another chance of changing its structural performance towards that of a risk currency.
Read the full report: UBS