A brief yield’s pullback fails to derail the greenback (Daily analysis 1.03.2021)

A sharp rise in the U.S. treasury yields caused severe market turbulences in February. On Monday, despite a strong, but brief pullback yields rise once again, which supports the U.S. dollar.

EUR/USD buyers fail to push the main currency pair above the 1,21 mark and another push lower takes place. 1,20 acts as a crucial level to watch as a break lower might result in a knee-jerk reaction and open further downside. In contrast to the euro, the pound sterling bounces, but has so far also failed to recover above 1,40. Nonetheless, EUR/GBP turns lower again and declines by a hefty 0.5 pct. In the emerging markets space, the zloty underperforms and EUR/PLN has already risen above 4,53 to trade at the highest levels in over a month. The most risky EMEA currencies, that is the South African rand, the Russian ruble and the Turkish lira all gain, led by the latter, which sky rockets over 2 pct.

This week markets will monitor closely the developments on the bond market as yields continue to drive the sentiment. A handful of Fedspeak might sched a new light on this trend, as monetary authorities should prove reluctant to allow for further bond selling resulting in the tightening of financial conditions. Datawise it is a busy week ahead with ISM data and the jobs market report due.