Treasury yields dropped from 4.412% to 4.351% following Scott Bessent’s appointment as fund manager, boosting market optimism. Despite a recent dollar decline, experts note its strength post-election. The dollar index decreased to 106.950, while the euro rose to 1.0496 dollars. U.S. economic data outperformed European results, impacting bond yields. Speculation of rate cuts emerged in the UK and the ECB, while bitcoin fell to $98,208 amid profit-taking before approaching $100,000.
Decline in Treasury Yields Amid Market Reactions
The yields on 10-year Treasury bonds experienced a decrease from 4.412% last Friday to 4.351%. This shift in the bond market reflects a positive response to the appointment of Scott Bessent as fund manager by President Donald Trump. Known for his extensive experience on Wall Street and his fiscal conservative views, Bessent’s selection has garnered optimism. However, he has also emphasized the importance of maintaining a strong dollar and has supported tariff measures, indicating that any dip in the dollar’s value may be temporary.
Market Dynamics and Currency Fluctuations
Ray Attrill, head of foreign exchange research at NAB, expressed his confusion regarding the notion that the dollar’s decline is linked to Bessent’s appointment, given that Bessent has championed dollar strength post-election. The dollar may be adjusting after a remarkable eight-week rally, marking only the third time this century such a streak has occurred. Currently, the dollar index stands at 106.950, down 0.5% from a two-year high of 108.090 reached on Friday. Against the Japanese yen, the dollar fell 0.4% to 154.18, distancing itself from a recent peak of 156.76. Meanwhile, the euro appreciated by 0.7% to 1.0496 dollars, recovering from a two-year low of 1.0332 dollars hit earlier.
In the backdrop of European manufacturing surveys revealing substantial weakness, U.S. surveys have shown unexpectedly robust results, which have led to a notable drop in European bond yields. This divergence has worked in favor of the dollar. Additionally, market expectations are leaning towards a more aggressive easing strategy from the European Central Bank, with a 59% probability of a half-point rate cut in December. Conversely, the likelihood of a quarter-point rate cut by the Federal Reserve has decreased to 52%, down from 72% a month prior. The market now anticipates a 154 basis point reduction from the ECB by the end of next year, in stark contrast to only 65 basis points expected from the Fed.
In the UK, disappointing retail sales figures have led to increased speculation about a potential rate cut by the Bank of England, now projected for February rather than December. As a result, the British pound fell to its lowest level in six weeks at 1.2484 dollars on Friday, but it saw a slight recovery of 0.4% to 1.2591 dollars at the start of Monday, still below last week’s peak of 1.2714 dollars.
In cryptocurrency news, bitcoin experienced a 1.2% decline, trading at $98,208, as traders engaged in profit-taking ahead of the psychological $100,000 mark. Since the U.S. election, bitcoin has surged over 40%, driven by expectations that regulatory conditions for cryptocurrencies may become more favorable under Trump’s administration.