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A decrease in American bond yields is pressure on the dollar, as investors are betting that an slowdown in economic growth pushes the federal reserve to continue to reduce interest rates despite persistent inflation.
The 10-year-old treasure yield fell 0.09 percentage points on Tuesday at 4.3%, the lowest level since mid-December. The drop of more than 4.8% last month was caused by an aggravated perspective for American growth, after a database has shown a low feeling of consumers and businesses.
Who struck the dollarWho is now down 2% this year against a basket of his peers, confusing expectations that Donald Trump’s return to the White House would continue to strengthen the currency. The dollar had already strengthened on the bets according to which the inflationary effect of the prices of the new president and the borders of immigration would prevent the Fed from reducing rates.
“The slowdown in growth and higher inflation expectations is a more negative mixture for the US dollar,” said Lee Hardman, principal analyst in the MUFG banking group.
Investors say the real fall Treasury The yields, which represent the yield of the offer after taking into account inflation, were a particularly important engine of the currency.
The yield on securities protected by the inflation of the treasury at 10 years (TIPS) dropped as low as 1.89% Tuesday, the lowest since early December and down 2.3% last month.
Persistent inflationary pressures have put the Fed in a link, because it would naturally respond by slowing down or ending its cutting cycle at rate, or even at signal speed. But the growth of growth – and repeated widths of Trump demanding that the president of the Fed, Jay Powell, is lower borrowing costs – grows in the other direction.
Trump initially strongly criticized The Fed after held prices last month, but later said that it was “the right thing to do”.
JPMorgan analysts underlined in a note last week the “significant erosion of us [due] to insensitive Fed policy in the face of a strong increase induced by prices in frontal inflation. ”
Short -term inflation expectations have climbed as the price of investors in the likely impact of Trump prices. The so -called two -year tests – which measure the difference between real yields and nominal yields and are the best supposition of investors in the place where inflation is heading – last week has reached its highest level since the early 2023.
American inflation increased unexpectedly to 3% in January and the last nourished minutes warned of “rising risk” for inflation. The expectations of long -term price increases have been at the highest since 1995.
Despite this, investors bet that the Fed will reduce the rates of an additional half point at the end of the year.
The fund directors said that the market took a vision of the gradator of the threat of domestic growth of the Stop-Start trade war launched by the new president, as well as other policies such as a repression of immigration and job shortcuts in the public sector.
The nominal yields of the American treasury also fell strongly from their summit in mid-January.
“The markets ask us if we have seen an exceptionalism in the United States culminating,” said Matthew Morgan, responsible for fixed income titles to Jupiter Asset Management, adding this uncertainty on the path of monetary policy, as well as prices, Government cuts and other areas, “can mean that this can mean less investment, hiring and growth”.
In addition to the lower dollar and lower yields, he said: “The following question will be whether rereading American growth leads to a rethink of risk assets”. After hitting a series of record heights, the actions lost ground during recent sessions.
An S&P survey of purchasing directors published last week showed that the service sector in the United States had contracted for the first time in more than two years.
UBS analysts said earlier this month than the decrease in real yields, while inflation expectations remained high, reflected a “stagflationist impulse” of the prices.
