Us Yields Must Press Higher Scotiabank

Us Yields Must Press Higher Scotiabank by Andrew Blumer last updated on February 23, 2025

Us Yields Must Press Higher For A Stronger Usd, According To Scotiabank

Greenback is seen trading upwards as the markets look towards the US CPI. The NFP report initially supported the USD, but it was all reversed after looking at the wage growth, which remained stalled.

According to Scotiabank, any strength in the greenback will be dependent on an increase in the bond yields. At the same time, it appears that the seasonal trends are no longer in favor of the greenback.

10-Year Bond Yields Hover At 4.30%

For now, the 10-year US bond yields are hovering near 4.30%, which supports the greenback for now. However, any further strength in the USD will have to be driven by a rise in the bond yields.

However, the recent levels of the bond yields and the greenback don't seem to be sustainable at all. As a result, both of these are at risk of downside if the Fed makes any dovish comments next week.

We may get some commentary from the Federal Reserve officials next week following the release of the US CPI. A sustained slowdown in the CPI could once again reignite hopes of rate cuts taking place in June or July at best.

In terms of seasonal trends, things are not looking so good for the USD (greenback). Historically speaking, April is usually weak for the DXY, especially after strong gains during Q1.

In the last 25 years, the average return of the DXY has been around -0.47%, which means there's a higher chance of downside. In fact, Apil is regarded as the 2nd worst month for the greenback after December.

One thing to note here is that we are talking about the performance of DXY based on averages. So, if April turns out to be good for the DXY, it would be nothing but an outlier.

In the next week, the readings of the upcoming CPI could alter the directional bias of the greenback and bond yields.