Markets are active into the NA open; oil prices have dropped to fresh lows (WTI is below $50), essentially evaporating any potential lingering inflation fears, which has helped to drive the expectation for central bank action further into the future and pushed the U.S. 10-year yield down below 2% and several other global 10-years to fresh lows. For currencies, the safe havens of JPY and gold are strong; while AUD and NZD have been given a lift by rumours of further Chinese stimulus and a stronger than expected Australian trade report; while NOK has dropped another full 1% on oil; and the European currencies continue to be weak. We expect ongoing USD strength—understanding that the trade is heavily positioned, but seeing that fundamentals and flows continue to support a strong USD.
Read the full report: FX Daily