Markets were roiled by an influx of volatility this past week owing to a monstrous move higher in government bond yields. The Nasdaq[1] and other major stock indices[2] faced heavy selling pressure as the 10-year Treasury yield pierced 1.5% for the first time since February 2020. This development triggered investors to rethink equity valuations and deleverage considering 1.5% is also the estimated S&P 500[3] dividend yield. Soaring real yields caused precious metals like gold[4] and silver[5] to swoon as well.
US Dollar[6] bulls sent the Greenback snapping higher across major currency pairs[7] thanks to the deterioration in market sentiment and relatively more attractive interest rate differentials. EUR/USD[8] rates whipsawed sharply lower while USD/JPY[9] jumped to a five-month high and USD/CHF[10] surged toward the 0.9100-price level.
GBP/USD[11] rejected the 1.4200-handle and appears to have formed a bearish shooting star candlestick[12] on a weekly chart. NZD/USD[13] price action gyrated as Kiwi strength, largely due to the new RBNZ housing remit[14], was undermined by broad-based US Dollar strength. The MSCI Emerging Markets Equity Index plunged -6.4% as EM FX weakened notably against the US Dollar.
Looking to the week ahead, traders will likely continue keeping close tabs on the recent bond selloff and corresponding surge in yields[15]. Scheduled event risk posed by the RBA rate decision due 02 March at 03:30 GMT brings AUD/USD[16] into focus for potential currency volatility. The DailyFX Economic Calendar[17] details a list of expected speeches from key central bankers like ECB President Christine Lagarde
