Central Banks Forex Market Intelligence News

The bond market holds all the cards as the central bank bonanza kicks off today

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The turn came on Friday amid dovish Fed talk and that is carrying over into the new week so far as the rally in bonds gathered pace in US trading yesterday. 10-year Treasury yields were sent down by 13 bps to 4.11% and are down another 1.5 bps today to just below 4.10% as we look towards European morning trade.

It is tough to pick at reasons for the snap rally but the climb down in UK gilt yields have certainly helped as the political uncertainty there dies down. All of this coming as we look to get the central bank bonanza started with the Bank of Canada meeting decision today.

In any case, as bond yields retreat we are seeing broader market sentiment also breathe a sigh of relief. Equities rallied strongly after some cautious undertones early yesterday, with the S&P 500 closing up 1.6% for a third straight day of gains. Meanwhile, the dollar also slumped across the board in what will be a welcome relief for Japan with USD/JPY now back down closer towards 148.00.

As the focus will stay on central banks in the week ahead, rates pricing is everything and the bond market is the one that is holding all the cards in dictating trading sentiment during this period.