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Rising inflation and reopening expectations drove global bond yields higher, driving a wide range of behaviors among the major currencies this week.

The comdolls and the Greenback were net winners overall, while the Swiss franc and Japanese yen were the biggest losers of the bunch.

Notable News & Economic Updates:

Chinese Caixin manufacturing PMI down from 51.5 to 50.9

RBA increases bond-buying operations to 4 billion AUD

Fastest growth of eurozone manufacturing sector for three years

ISM Manufacturing PMI: 60.8 in February vs. 58.7 in January

Canadian manufacturing growth picks up in February: 54.8 in February vs. 54.4 in January

RBA says QE program can be extended if necessary

Australian economy expanded 3.1% vs. projected 2.5% GDP growth in Q4 2020

Canada GDP Bests Expectations With 9.6% Climb in 4Q

Fed Chairman Powell says economic reopening could cause inflation to pick up temporarily

Nonfarm payrolls increased by 379,000 in February and the unemployment rate was 6.2%.

Bank of Japan’s Kuroda stresses need to keep bond yields ‘stably low’

Rising Bond Yields Dominates

US 10-yr yield vs. S&P futures, Nasdaq 100 futures & Gold futures
US 10-yr yield vs. S&P futures, Nasdaq 100 futures & Gold futures

We can’t talk about the trading week in forex without quickly mentioning the main market driver these days: rising bond yields.

And in case you’re not caught up as to why they’ve been moving markets lately, take a look at Forex Gump’s post, “What’s the Deal with Bond Yields These Days?

And if you are caught up, you know that rising yields have been a thorn in the side of many different asset classes, and this week was no different as we saw gold and equities fall with every step higher in the bond yield.

The market event of the week seems to go to Federal Reserve Chair Jerome Powell’s statement on Thursday, which prompted a spike higher in bond yields after he recognized that inflation was moving higher.

He emphasized that this was likely a temporary situation, but based on the market’s reaction, it’s likely traders didn’t believe him.

The spike in volatility was also likely due to the idea that the Fed Chair failed to meet market expectations that the Fed would take additional actions to calm the bond market and rising bond yields.

Safe-Havens Losing their status?

Overlay of Inverted JPY Pairs: 1-Hour Forex Chart
Overlay of Inverted JPY Pairs: 1-Hour Forex Chart
Overlay of CHF Pairs: 1-Hour Forex Chart
Overlay of CHF Pairs: 1-Hour Forex Chart

The Japanese Yen and Swiss Franc bulls have fallen victim to the damage inflicted by the bond markets as they lose a bit of their status as safe havens due to the rising yields.

Why park your cash in negative-yielding assets like JPY and CHF, am I right?

Especially when the bond yields in the U.S. and other countries are looking much, much better right now?

This sentiment is likely why the U.S. dollar bounced nicely this week against most of the major currencies. Overall, this shift in sentiment is likely to remain in the short-term as long as economic recovery optimism and inflation expectations remain.

Slowing covid case/death numbers and more stimulus on the way from the U.S. will also likely remain drivers for these biases as well.

Overlay of USD Pairs: 1-Hour Forex Chart
Overlay of USD Pairs: 1-Hour Forex Chart

Comdolls Remain Net Outperformers

Overlay of AUD Pairs: 1-Hour Forex Chart
Overlay of AUD Pairs: 1-Hour Forex Chart
Overlay of NZD Pairs: 1-Hour Forex Chart
Overlay of NZD Pairs: 1-Hour Forex Chart
Overlay of CAD Pairs: 1-Hour Forex Chart
Overlay of CAD Pairs: 1-Hour Forex Chart

Comdolls took charge early this week, but AUD & NZD couldn’t hold onto its gains as broad risk-off sentiment took charge on Thursday after Jerome Powell’s failed to calm bond yields.

Overall, the comdolls once again benefited from the reflation theme that’s been driving broad risk sentiment higher, but the real winner this week was the Canadian dollar.

CAD bulls likely benefited from the recent rally higher in oil prices on reopening expectations and got an extra boost on Thursday after OPEC’s meeting.

WTI and Brent Crude Oil CFD 1-Hour Chart
WTI and Brent Crude Oil CFD 1-Hour Chart

Traders had expectations going into the OPEC meeting that they would raise oil production by 1.5M bpd, but instead agreed to stay cautious and only raise by 150K bpd. Oil traders quickly priced in the fresh news, pushing to over $66 per barrel of WTI crude into the weekend.