US Bond Yields continue to rise, despite the Fed being well into a rate cutting cycles, due to market uncertainty over the Fed’s commitment to cutting rates in 2025. President Trump has proposed an ‘economic emergency’ may be declared, in order to impose a raft of global tariffs, on inauguration. This has unsettled bond markets and pushed the US Dollar higher. The ADP jobs report was weaker than expected, following the Jolts Job openings report, confirming a softer labour market ahead of the Non-Farm Payroll number, due for release Friday. Attractive bond yields are hard to resist and this explains much of the gains of the US Dollar, which is also enhanced by the uncertainty, created over Trumps proposed economic policies. The EUR slumped to below 1.0300, while the GBP crashed under 1.2350.The rising reserve unsettled the commodity currencies, ending their ‘dead-cat bounce’. The AUD slumped to below 0.6200, while the NZD plunged to under 0.5600, once again. The Australian inflation number jumped back to 2.3%, from 2.1%, which may well encourage the RBA to hold rates ‘higher for longer’. The attractive Australian bond yields were not enough to support the flailing currency, as tariffs will impact indirectly, if not directly.
