Dollar boosted by rising Treasury yields; euro slips on weak data

Investing.com – The US dollar rose Wednesday, benefiting from rising bond yields after the release of healthy US economic data, while weak German industrial orders weighed on the euro.

At 04:35 ET (09:35 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.3% higher to 108.690.

Dollar gains as Treasury yields soar

The dollar has continued to push ahead Wednesday, following on from the prior session’s positive tone after data showed US job openings unexpectedly rose in November, layoffs were low, while services sector activity accelerated in December and a measure of prices paid for inputs hit a two-year high.

This resulted in 10-year Treasury yields climbing to an eight-month high, while the benchmark 30-year yield came close to the 5% level. 

“Yesterday’s US data releases were hawkish for the Fed, and the implied probability of a March rate cut has now dropped below 40%,” said analysts at ING, in a note.

“The most remarkable print was the ISM prices paid subcomponent, which spiked to the highest level since January 2023. If a generally resilient economy was already accounted for when the Fed met in December, a resurgence in inflation concerns could drive an even further hawkish tuning in the policy message.”

The Federal Reserve cut the number of rate cuts it sees this year to two at its December meeting, but traders are now only pricing in around 37 bps of easing through this year, according to LSEG data.

There is more data to digest Wednesday, in the form of the monthly ADP private payrolls and weekly jobless claims, ahead of Friday’s release of the closely watched US jobs report for further clarity on the health of the world’s largest economy.

German economic weakness weighs on euro

In Europe, EUR/USD fell 0.2% to 1.0326, adding to the losses of around 0.5% overnight after the release of more disappointing economic data from the region’s largest economy – Germany.

German industrial orders fell 5.4% in November, sapped by a decline in large orders, while the country’s retail sales fell 0.6%, bursting hopes for a boost from pre-Christmas promotions like Black Friday and Cyber Monday.

Investors are currently looking for the ECB to ease interest rates by around 100 basis points in the first half of 2025.

“There is only a speech by French central bank governor Villeroy to watch in the eurozone calendar today. EUR/USD may find decent support at 1.0300 for now,” said ING.

GBP/USD traded 0.2% lower to 1.2447, with little in the way of economic data due for release Wednesday, and only a speech from Bank of England Deputy Governor Sam Woods to digest.

The Bank of England held interest rates unchanged last month, and is expected to proceed cautiously with further rate cuts this year with inflation still above target.

Yuan sentiment remains weak

In Asia, USD/CNY rose 0.1% to 7.3511, with the Chinese currency hitting its weakest level in 17 years earlier in the week.

Sentiment remains weak surrounding China ahead of President-elect Donald Trump’s inauguration on Jan. 20, with Trump having vowed to impose steep trade tariffs on China. 

USD/JPY gained 0.1% to 158.19, after recovering marginally from its weakest level in nearly six months.

The yen stemmed its recent losses after government officials offered a verbal warning on potential currency market intervention, which saw traders adopt more caution in shorting the Japanese currency.