EUR/USD Bounce Hinges on Treasury Yields Below 5%
The EUR/USD rebound from last week's low hinges on U.S. Treasury yields staying below 5%. The pair traded at 1.1492, up 0.24% on Thursday, after falling to a seven-week low following the Federal Reserve's first rate hike since July 2023.
The recovery came as falling oil prices dragged down U.S. Treasury yields and the dollar gave back part of its post-Fed advance. The size of this week's move sets the context: on September 11, EUR/USD held near 1.1610 in Asian trading, but by Wednesday night it had fallen to 1.1474, a 1.2% decline.
The dollar did the damage, not the euro. The dollar index touched an intraday high of 100.37 on Thursday, its strongest level since July 31, before easing to 100.08. On Wednesday it had jumped 0.6% to 100.21.
Both central banks raised rates by 25 basis points in the past week, but what changed is the expected path. Money markets price 75 basis points of further Fed hikes by next June, while the ECB refuses to pre-commit beyond its latest move.