Trusted by over 15 Million Traders
The Most Awarded Broker
for a Reason
CATEGORIES
News
- Guide to short-term operations of major currencies on July 21
- Silver/USD rises to $38.40, benefiting from weakening USD
- A collection of positive and negative news that affects the foreign exchange mar
- 8.7 Analysis of the latest market trends of gold crude oil surge and plummeting
- Gold's high last Friday decided whether it could continue, and the short-term ra
market analysis
Bond yields "conquer an army" and the US dollar falls into a passive position
Wonderful introduction:
The moon waxes and wanes, people have joys and sorrows, life changes, and the year has four seasons. If you survive the long night, you can see the dawn, if you endure the pain, you can have happiness, if you endure the cold winter, you no longer need to hibernate, and after the cold plums have fallen, you can look forward to the new year.
Hello everyone, today XM Forex will bring you "[XM Foreign Exchange Market xm-forex.commentary]: Bond yields "conquered the army", and the US dollar fell into passiveness". Hope this helps you! The original content is as follows:
The global bond market ushered in a critical turning point in October - the UK 10-year yield hit the largest monthly drop since the end of 2023, falling 30 basis points in a single month; the German and French bond markets also simultaneously recorded their deepest declines since April, and Japan's 30-year yield also fell. This change marks the initial establishment of a softening trend in the interest rate path and begins to reshape the asset structure of the US dollar, gold and the euro.
The fall in bond yields not only affects monetary policy expectations, but also triggers a chain reaction in the cross-asset market: the US dollar is under pressure and weakening, gold is gaining momentum, and the euro is quietly building the basis for a rebound. Behind the seemingly calm prices, an asset repricing led by the bond market is unfolding.
Lower yields suppressed the performance of the U.S. dollar
UK Treasury bonds became the leader of the bond market this month, with yields falling sharply, reflecting the market's dual pricing of slowing inflation and weak employment. The British CPI was lower than expected, and the xm-forex.combined fiscal policy released signals of tax increases and budget easing, forming a "perfect xm-forex.combination" for the bond market to rebound. Supply pressures eased simultaneously - the Bank of England reduced its long-term bond sales cycle, further supporting bond market performance.
This was transmitted to the US dollar, and US bond yields also fell for three consecutive months. Although Federal Reserve Chairman Powell tried to play down expectations of a December interest rate cut, which led to a late rebound in U.S. bonds, the overall downward trend in yields has begun to take shape. Historical data shows that when the world's major government bond yields fall close to 30 basis points per month, the U.S. dollar index often corrects by 1.2%-1.5%, as funds shift from U.S. dollar assets to non-U.S. bonds.
Although the U.S. dollar index is currently barely holding steady at 99.5369, it is structurally showing weakness. If the bond yieldIf it remains low, the probability of the US dollar falling below the 99 mark will exceed 60%, which will open up upside space for gold and the euro.
Gold: Short-term pressure remains strong despite medium-term strength
Spot gold fell 0.32% during the day to US$4,012. On the surface, it was subject to the stabilization of the US dollar, but the underlying logic is being reconstructed as the bond market turns. In the early stages of the decline in yields, the attractiveness of bonds increases, which may divert some gold funds. Historical backtesting shows that when the bond market rises by 5% per month, gold prices stagnate by 0.8% on average.
However, from a medium- to long-term perspective, lower bond yields will weaken the dollar, thereby boosting gold. Slowing inflation and weak labor markets in the United Kingdom and the euro zone are driving funds into safe-haven bonds, as evidenced by strong demand at Japan's two-year government bond auctions. Although high debt problems remain, the rebound in bond markets has significantly amplified the vulnerability of the US dollar.
Once the U.S. dollar index falls back to the 98.5-99 range, gold will have a realistic basis to test the resistance level of $4,050. The current low fluctuations in gold prices are not a sign of weakness, but a sign of a momentum-building stage. As the bond market establishes an inflection point, the allocation value of gold as a non-interest-bearing asset will be highlighted again.
Euro: The east wind in the bond market helps the exchange rate breakout
The euro rose slightly against the US dollar, which seemed dull, but actually contained breakthrough momentum. German and French bond yields have fallen significantly, attracting funds to return to the euro zone bond market and indirectly boosting the attractiveness of euro assets.
The logic of the strengthening of the euro is clear: the decline in European bond yields weakens the relative advantage of the U.S. dollar, driving the exchange rate center of the euro against the U.S. dollar to move upward. Although political uncertainty in France still exists, the rebound in the bond market has effectively alleviated market concerns. If the U.S. dollar weakens as U.S. bond yields continue to fall, the probability of the euro breaking through the 1.16 mark will rise to 65%.
Similar to gold, the euro has also benefited from the asset rotation brought about by the turn in the bond market. Under the dual support of a weakening US dollar and rising risk sentiment, the euro is expected to form a coordinated rise with gold.
Outlook: The stable period of the bond market determines the direction of assets
The "scar recovery" of the bond market in October is essentially a preview of the softening of interest rate expectations. Its impact on asset prices is far from over: although the US dollar is stable on the surface, downward pressure is accumulating; gold has built support near US$4,000 and is expected to restart its upward trend; the euro is on the verge of a breakthrough, only waiting for the stabilization of the bond market to provide the final push.
However, risks have not dissipated - the repeated expectations of interest rate cuts by the Federal Reserve, the late rebound in U.S. bonds, and the upcoming budget tests of Britain and France may all disturb the stability of the bond market. If yields can stabilize at current levels, the dollar will fall below 99, gold will test 4050, and the euro will break through 1.16, which will become the main line of the market in November.
The bond market has transformed from a background variable into a key driver of asset pricing. The yield turning point in October may become the starting point for asset rotation in the fourth quarter.
The above content is all about "[XM Foreign Exchange Market xm-forex.commentary]: Bond yields "overwhelm an army", and the US dollar falls into a passive position", which is carefully xm-forex.compiled and edited by the editor of XM Foreign ExchangeYes, I hope it will be helpful to your trading! Thanks for the support!
Live in the present and don’t waste your present life by missing the past or looking forward to the future.
Disclaimers: XM Group only provides execution services and access permissions for online trading platforms, and allows individuals to view and/or use the website or the content provided on the website, but has no intention of making any changes or extensions, nor will it change or extend its services and access permissions. All access and usage permissions will be subject to the following terms and conditions: (i) Terms and conditions; (ii) Risk warning; And (iii) a complete disclaimer. Please note that all information provided on the website is for general informational purposes only. In addition, the content of all XM online trading platforms does not constitute, and cannot be used for any unauthorized financial market trading invitations and/or invitations. Financial market transactions pose significant risks to your investment capital.
All materials published on online trading platforms are only intended for educational/informational purposes and do not include or should be considered for financial, investment tax, or trading related consulting and advice, or transaction price records, or any financial product or non invitation related trading offers or invitations.
All content provided by XM and third-party suppliers on this website, including opinions, news, research, analysis, prices, other information, and third-party website links, remains unchanged and is provided as general market commentary rather than investment advice. All materials published on online trading platforms are only for educational/informational purposes and do not include or should be considered as applicable to financial, investment tax, or trading related advice and recommendations, or transaction price records, or any financial product or non invitation related financial offers or invitations. Please ensure that you have read and fully understood the information on XM's non independent investment research tips and risk warnings. For more details, please click here