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US Dollar Gains Ground as Treasury Yields Rise, Gold Retreats

5 months ago

In a notable surge, the US dollar reached a one-month high, propelled by a rise in Treasury yields following hawkish remarks from European Central Bank (ECB) officials pushing back against expectations of early and substantial rate cuts. Gold, in response, experienced a decline, accompanied by a broad-based decrease in Treasury prices as the market resumed trading after the weekend. Both 10-year yields and the 2-year debt, sensitive to policy shifts, advanced approximately six basis points each. Investors are now turning their attention to the upcoming speech by Federal Reserve Governor Christopher Waller later on Tuesday, eager to gauge any further resistance to the prevailing expectations of a rate cut in March.

The hawkish stance from ECB Governing Council member Robert Holzmann, who emphasized uncertainties related to inflation and geopolitical factors, challenges the notion of imminent rate cuts in the current year. This sentiment echoes previous remarks from ECB President Christine Lagarde, who cautioned against premature discussions about reducing borrowing costs. Meanwhile, oil prices exhibited stability amid persistent Houthi attacks on ships in the Red Sea, heightening tensions in the Middle East. However, this was counterbalanced by a precarious global economic outlook and the strengthening US dollar. The global benchmark Brent managed to maintain levels above $78 a barrel, while West Texas Intermediate traded below $73.

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