Calmer tones in markets, well for now at least | Forexlive
It was a volatile day in markets yesterday as we saw early jitters come about in Europe before things started to turn ahead of US trading. The recovery in sentiment continued and it was a much welcome development for risk trades.
To put things into context, 2-year Treasury yields fell from near 4.03% to 3.63% in European trading yesterday before ending the day at 3.98% – up by roughly 8 bps. The same sort of recovery was seen in European bond yields, with 2-year German bond yields having been down by 34 bps to 2.09% but closing at 2.32% despite the challenging gap lower:
For now, we’re seeing more of a calmer mood across markets again with US futures keeping little changed. The dollar is steadier while the antipodeans are the laggards though but it is still early in the day.
The focus and attention will now shift towards the Fed policy decision tomorrow but there are still some risks to be wary about. First Republic shares were sent plunging by 47% yesterday and will remain a key spot to watch in gauging market sentiment later on.
The CME Fedwatch tool is putting odds of a 25 bps rate hike at roughly 74% now, which reflects the improvement in the market mood yesterday. We’ll see if or not that will carry on in the sessions ahead.