Recently, traders are concerning about the rise of the bond yields, somehow reflecting the inflation expectations. The benchmark 10-year US Treasury yield broke 1% last week, touching a high of 1.18% on Tuesday, that causing uncertainty to the market. Despite Fed officials reminded that the monetary policy, likely saying QE, will remain supportive in the foreseeable future, the 10-year yield is still trading at 1% above.
The risk-on mode is quite clear as investment market is expecting the wins of Democrats in Georgia. Analysts generally believe that a Democrat-controlled Senate would benefit the economy overall, so that traders are betting on those riskier assets. The yield of the benchmark 10-year US Treasury climbed over 1%, the first time since the global pandemic started in the March of last year.
Obviously, investors are betting on the strong fiscal and continuous monetary support from the US while all the uncertainties around have been lowered, pushing the dollar index down to 90 level below.
In the FX market, Sterling jumped to 1.35 level against dollar as investors bet on the Brexit deal, that can avoid a market chaos next year of the UK’s economy. The euro also strengthened to 1.22 level. On the other hand, the safe-haven dollar is weakened due to the general bullish outlook of the global economy.
On Monday, Asian stock markets are generally bullish cautiously, following a mixed trade last Friday in Wall Street. Investors are now digesting those positive news of vaccine, boosting the risk appetite of the financial market worldwide. The approval of Pfizer Inc and BioNTech’s Covid-19 vaccine in the US sparked optimism of a faster economic recovery.
However, it is not really positive as the UK officials said this is just "agreement in principle". The trade deal is not yet reached. Boris Johnson also warned that the Hard Brexit is still possible and he will just quit any further negotiation if no deal. Watching the GBP/USD trend, it is clearly that traders are still very cautious over the two "talks" above.
The dollar index dropped to 91.7 level on Monday, following the recent downtrend since November, declining from above 94 level. The dollar keeps testing a more than two-year low, that mainly driven by the vaccine optimism and the easing policies expectations of the US side.
On Monday, Asian stock markets are all trading higher as investors are optimistic towards the deal of 15 economies in the region that formed the largest trade alliance in the world. The trade deal, called “The Regional Comprehensive Economic Partnership, RCEP”, is to mainly reduce tariffs across many areas.
On Wednesday, the Wall Street was mixed, while the Dow fell just 23 points, but the Nasdaq bounced back 2% from the recent weakness. So, tech stocks on Thursday were good after the rebound overnight stateside. However, the stock markets are still struggling, waiting for further hints leading the direction.
On Friday, investors are cautious watching the final results from the US election, even the early birds have already bet on Biden’s win these two days. Based on the latest record, Biden has racked up 253 electoral votes, closed to the White House. Few battleground states such as Arizona and Pennsylvania are the focus so far, and the prediction is favored to Biden side.