Investing.com – The US dollar rose on Wednesday, benefiting from rising bond yields following the release of healthy US economic data, while weak German industrial orders weighed on the euro.
At 04:35 ET (09:35 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.3% higher at 108.690.
The dollar rises as government bond yields rise
The dollar continued to rise on Wednesday, echoing the previous session’s positive tone, after data showed the US rose unexpectedly in November, layoffs were low, while service sector activity accelerated in December and provided a benchmark for the prices paid for inputs reached biennial levels. high.
This resulted in the yield on 10-year government bonds rising to an eight-month high, while the benchmark 30-year yield was close to the 5% level.
“Yesterday’s US data was hawkish on the Fed, and the implied probability of a March rate cut has now fallen below 40%,” ING analysts said in a note.
“The most notable print was the subcomponent of ISM prices, which spiked to the highest level since January 2023. If a generally resilient economy was already factored in when the Fed met in December, a revival of inflation concerns could could lead to an even further aggressive mood. in the policy message.”
The Federal Reserve cut the number of rate cuts it sees this year to two at its December meeting, but traders are now only expecting a easing of about 37 basis points this year, according to LSEG data.
There is more data to digest on Wednesday, in the form of the monthly and weekly figures, ahead of Friday’s release from the closely watched US for further clarity on the health of the world’s largest economy.
German economic weakness is weighing on the euro
In Europe, yields fell 0.2% to 1.0326, adding to losses of around 0.5% overnight after the release of more disappointing economic data from the region’s largest economy: Germany .
fell 5.4% in November, undermined by a decline in large orders, while the country’s fell 0.6%, dashing hopes of a boost from pre-Christmas promotions such as Black Friday and Cyber Monday burst.
Investors are currently looking for a rate cut of around 100 basis points in the first half of 2025.
“There is only a speech by the governor of the French central bank, Villeroy, on the eurozone calendar today. EUR/USD can find decent support at 1.0300 for the time being,” ING said.
traded 0.2% lower at 1.2447, with little economic data due to be released on Wednesday, and only a speech from Bank of England deputy governor Sam Woods to digest.
Interest rates have remained unchanged over the past month and are expected to continue cautiously with further rate cuts this year, while inflation is still above target.
Yuan sentiment remains weak
In Asia, yields rose 0.1% to 7.3511, with the Chinese currency hitting its weakest level in 17 years earlier this week.
Sentiment around China remains weak ahead of President-elect Donald Trump’s inauguration on January 20, with Trump vowing to impose sharp trade tariffs on China.
rose 0.1% to 158.19, after a marginal recovery from the weakest level in almost six months.
The yen reversed its recent losses after government officials issued a verbal warning about possible intervention in the currency market, making traders more cautious about shorting the Japanese currency.
