The tendency of dollar sustainable growth met resistance just above the level of 92.00 during the New York session on Tuesday, after Tier 1 news fell short of investors’ expectations. GTR production and employment readings turned out to be worse than forecasts but above the neutral level of 50 points, production costs decreased by 1.7% compared to February.
GRT indicators are important for the market primarily because their output is preceded by Non-Farm Payrolls and consumer inflation and provides a preliminary assessment of these indicators. Based on the surveys, their assessment allows you to compare common inflation and employment data from the viewpoint of how particular person (respondent) sees it. But the attempt to compare subjective views with even-handed statistical data sometimes leads to nothing. .
Going beyond the events of short-term consequences, it is worth considering the potential impact of today’s Ged meeting on the dollar. However, like the format of the meeting (without a conference), and market expectations indicate that the reserve of surprise in the information that will be received today is minimal. Investors believe that raising the rate today will be early but appropriate at the next meeting in June. In this case, there is a balance of expectations of three rate hikes against four, since the rate increase in May gives even more room for reflection on two more increases, which will make investors buy up the dollar even more.
At the fixed yield market in the US, we see the following situation: the yield of 10-year Treasury bonds reached a four-year maximum of 3.035% but retreated later. Long-term financing for companies is becoming more expensive and brilliant corporate reporting is now being met by investors as the investment boom remains questionable despite the observed upturn.
The spread between the 10-year and 2-year treasury securities continued its decline and fell to a value of 0.46%. Analysing why this happens, it is necessary to distinguish three factors which influence the demand for Treasury securities: time, risk, interest rates.
On the supply side, we can mention the growth in the rate of issuance of treasury bonds, as the government needs to finance a program of reducing taxes through increasing public debt. This also puts buyers in a favourable position.
Before the meeting of the Federal Reserve, the yield on the two-year treasury bonds rose to a nine-year high (September 2008). The optimism of investors in the bond market and the cautiousness in the stock market probably will not undergo any changes in connection with the decision of the regulator.