Pulse of the Market-A fresh spike in U.S Treasury yields

A fresh spike in U.S Treasury yields sparked a risk-off move in global currency markets on Friday, with the dollar reversing its fall from earlier in the week and riskier currencies taking a hit. Market participants have grown wary in recent weeks that there could be a spike in inflation caused by massive fiscal stimulus and pent-up consumer demand when economies reopen from coronavirus lockdowns. Although soft U.S CPI data on Wednesday went some way to calm those fears, U.S Treasuries sold off again on Friday, with the 10-year yield rising above 1.6%. The dollar was up 0.5% on the day at 91.907, and on track to end the week little changed overall having failed to regain Tuesday’s peak of 92.506, which was its strongest since November. There is concern over inflation in the months ahead and that sense is dollar-supportive. It looks like pretty upbeat in the United States in terms of rollout of further vaccine plays, and of course that feeds into the economic recovery in the States, and a time when fiscal stimulus is extremely high, monetary stimulus is extremely high. President Joe Biden told U.S states on Thursday to make all adults eligible for a coronavirus vaccine by May 1, hours after he signed a $1.9 trillion stimulus bill into law. My personal view is that the dollar is not on a trajectory for a higher fundamental trend. Riskier currencies lost out, erasing recent gains. The Australian dollar - which is seen as a liquid proxy for risk appetite - fell by 0.7% to 0.774310 versus the U.S dollar . The European Central Bank said on Thursday that it would increase the pace of its money printing to prevent a rise in euro zone bond yields. Although the euro was down around 0.6% at $1.1918, it was set for a small weekly gain. The ECB “holistic” approach to keep financing conditions favorable is too vague in our view to focus minds and drive the EUR lower; the US data and the Fed remain the main market drivers. Market attention now turns to the U.S Federal Reserve’s policy meeting next week, where traders will be looking for any comments about rising yields. Dollar-yen was up around 0.4%, changing hands at 108.945 , close to the 109.235 reached on Tuesday which had been the yen’s weakest since June 2020. Struggling under the third wave of the COVID-19 pandemic, the euro zone economy will need at least until the autumn to turn a corner, outgoing Lithuanian central bank chief Vitas Vasiliauskas told reporters on Friday.