Sell-off triggers a sell-of (Daily analysis 26.02.2021)

Risk assets and currencies end February on the back foot as another sharp upsurge in the US Treasury yields spokes market participants. The US dollar strikes back as a consequence, and emerging markets currencies trade heavy.

The Federal Reserve Chair Jerome Powell was able to calm investor’s nerves only for one day. Bond market sell-off returned with a new force and caused jitters in other asset classes. Most of all, equities tumble with Dow Jones Industrial Average rejecting all-time highs set on Wednesday and tech-heavy Nasdaq plummeting more than 3.5 pct.

At the same time, the greenback (the US dollar) is supported. The EUR/USD pair was unable to settle above the 1.22 mark, and it sharply declines towards 1.21. The pound sterling goes from hero to zero scenario. The cable (the GBP/USD) trades tad the highest levels since spring 2018 on Wednesday. However, it is poised to end the month below the 1.40 handle and with a weekly loss against both the dollar and the euro. The safe haven currencies feel the burden of the limited scope for the yield rise in their respective bonds markets and end the month as clear G-10 underperformers. Both the Swiss franc and the Japanese yen have so far declined almost 1%. In the emerging markets space, the Turkish lira sell-offs severely and is heading for a 5% decline.