How the stock market has performed after Veterans Day over the past decade
In the wake of Veterans Day, the stock market's reaction typically follows a predictable pattern, but this year is different due to rising bond yields. With the benchmark 10-year Treasury yield recently surpassing the 5% mark, we are witnessing continued volatility in tech stocks, which are particularly sensitive to interest rate movements. As markets adjust to this macroeconomic backdrop, currency pairs are likely to feel the impact, particularly in terms of USD valuations. Traders should consider the implications of these dynamics as they position for potential shifts over the coming weeks.
Where it sits in our coverage
Our consensus EUR/USD target sits at 1.075, with Goldman at the upper bound (1.12) and BofA at the lower (1.04). The current movements in the stock market and bond yields may influence sentiment towards USD strength, prompting market participants to reconsider their positions going into the end of the year.
How firms align
Goldman aligns with the optimistic view on USD as they project 1.12, suggesting a resilient dollar despite fluctuations in equities. On the other hand, BofA maintains a more cautious stance, foreseeing a dip to 1.04 amid tightening financial conditions. This divergence illustrates varied investor sentiment regarding the dollar's performance aligned against external economic pressures.
What the data shows
Recent analyses highlight a trend towards increased volatility in equity markets and its subsequent impact on FX flows. Our insights point towards a potential recalibration of dollar strength as equities react to interest rate adjustments, emphasizing the crucial nature of economic data releases in guiding future movements. For in-depth analysis, refer to /research/market-volatility.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01Rising Treasury yields over 5% could exert upward pressure on the USD.
- 02Tech stocks' performance is highly correlated with bond yield changes.
- 03Watch for shifts in sentiment around equity performance as rates adjust.
- 04A breakout above 1.075 could indicate a stronger USD in the near term.
Market implications
The next key levels to monitor are 1.075 for potential resistance and 1.12 for bullish targets. With the Fed's upcoming meeting, market positioning is likely to shift based on rate expectations. Keep an eye on how equities react during this period, as they may provide critical clues for USD direction.
Risks to this view
A significant drop in bond yields could undermine the current bullish stance on the USD, particularly if accompanied by positive equity performance. A shift in the Fed's narrative surrounding rate hikes could also reverse expectations, challenging the current consensus on USD strength.
Sentiment by currency
USD~EUR~JPY~GBP~Composite USD score: +0.00
Sources & References
How we cover this story