According to the markets ' consensus, it might be too early to start talking about the withdrawal of monetary stimulus. Banking experts believe that employment and inflation still need to show a solid recovery for the Federal Reserve to change its current monetary policy. The end for the asset purchase program and a potential interest rate hike does look plausible once the U.S. labor market gets more robust.
However, in the U.S treasury bond market, the yields rebounded, with the U.S 10-year benchmark once again surpassing the 1.60% level.
In terms of prices, Tnote failed to overcome the resistance zone located at 132.65 and is down again, so the latest upward movement can be considered as corrective from a technical analysis point of view. Now the bond price finds itself between 132.65 and 130.86, the latter level corresponding to the yield of 1.77%.
The U.S Dollar goes up.
The U.S Dollar moved higher after bond yields’ rebound, as they are positively correlated. Compared to the euro, it has not managed to go above 1.2100, while against the Australian Dollar, it has remained below the level of 0.7822. Against the Japanese yen, the U.S. currency rebounded from 107.60, trading at levels close to 110.
In this case, the benchmark level to watch could be around the 111.00 zone. Above this value, the end of the structural downward trend for the pair would be anticipated.
The stock markets stagnate.
Stock markets have lost volatility and are moving slowly without losing territory. However, they experienced slight corrections despite the upbeat earnings reports.
Any news surrounding Biden’s new taxes for the wealthy would have adverse effects on stocks. It should not be forgotten that most of the increases that these markets experienced during Trump's term were due precisely to the opposite, meaning reductions in corporate taxes.
From a technical perspective, the Tech100 index appears to be advancing in an unusual "reversal pattern", known as a "diamond". If confirmed, this could lead to more significant corrections. The reference level for this would be below the 13,800 area.
Sources: Bloomberg, reuters.com.