Dollar struggles to capitalize on surging US T-bond yields

The dollar failed to preserve its strength in the second half of the day on Tuesday and the US Dollar Index ended up closing in negative territory. Although the benchmark 10-year US Treasury bond yield climbed to its highest level since May 2019, the risk-positive market environment made it difficult for the greenback to find demand. Markets remain relatively quiet early Wednesday as investors await FOMC Chairman Jerome Powell’s speech, February New Home Sales data from the US and the European Commission’s preliminary Consumer Confidence report for March.

The S&P 500 Index rose more than 1% on Tuesday and US stock index futures are posting small daily gains heading into the European session.

Ukrainian President Volodymyr Zelenskyy said on Tuesday that they were ready to discuss commitment not to join NATO and added that they could also discuss the status of Crimea and Donbass after the ceasefire. Meanwhile, the Wall Street Journal reported that US President Biden was planning to sanction “hundreds of Russian lawmakers” as early as Thursday. Commenting on the economic impact of the Russia-Ukraine conflict, International Monetary Fund (IMF) Managing Director Kristalina Georgieva said that the war would slow economic growth but added that they were not yet expecting a global recession.

EUR/USD reversed its direction after declining toward 1.0950 on Tuesday and managed to close above 1.1000 with small daily gains. The pair continues to edge higher early Wednesday toward 1.1050.

GBP/USD rose toward 1.3300 but seems to have lost its bullish momentum. The data published by the UK’s Office for National Statistics revealed that inflation, as measured by the Consumer Price Index (CPI), jumped to 6.2% on a yearly basis in February from 5.5% in January.

Gold fell sharply on Tuesday and erased all the gains it registered on Monday. Surging US Treasury bond yield weighed heavily on the yellow metal and XAU/USD was last seen trading in negative territory below $1,920.

USD/JPY extended its impressive rally and rose more than 100 pips on Tuesday. The pair preserves its bullish momentum and trades at its strongest level since February 2016. Earlier in the day, Japanese Prime Minister Fumio Kishida said that they were likely to order an additional economic stimulus package by the end of March to cushion the impact of the rising prices of oil and other goods.

NZD/USD advanced to its highest level since November before going into a consolidation phase near 0.6950 on Wednesday. New Zealand Prime Minister Jacinda Ardern announced earlier in the day that they decided to ease the COVID-linked activity restrictions from Wednesday morning in Auckland.

After managing to hold above $40,000 earlier in the week, Bitcoin gained more than 3% on Tuesday. BTC/USD is moving up and down in a narrow channel around $42,000 on Wednesday. Ethereum reached its highest level in more than a month at $3,050 on Tuesday but retreated below $3,000 early Wednesday.

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