(Your yields keep lifting me) higher and higher

Market reports
Thanim Islam
  • US debt ceiling talks productive but still no deal
  • US dollar supported by rising yields
  • PMI numbers in focus



Debt ceiling talks were deemed productive and positive yesterday, with President Joe Biden reiterating once again that default is off the table, although an agreement has still yet to be reached.

USD erased losses from earlier in the day following calls from Fed speakers that more rate hikes may be needed to quell price pressures. Yields on US treasuries climbed as a result. GBPUSD and EURUSD stayed close to Friday’s lows as the rate expectations between respective central banks continued to narrow.


Market rates

* Daily move - against G10 rates at 8:00am, 23.05.23

** Indicative rates - interbank rates at 8:00am, 23.05.23

Data points

  • EUR – ECB Guindos, Muller, Villeroy, and Nagel
  • GBP – BoE Bailey and Haskel

Our thoughts

All eyes on PMI numbers to give markets a gauge of how the UK, EU, and US performed in May. There is an expectation for slightly lower numbers to come in across the board when compared to April, and as ever we will be looking for divergence from what’s expected. UK service numbers will be the focus with regards to BoE rate expectations this year. Ahead of UK inflation numbers on Wednesday, GDP numbers from Germany and the US on Thursday, and core PCE numbers on Friday, markets seem likely to continue to be dictated by Fed speak as well as debt ceiling talks. For the time being the easing of Fed rate cuts this year and rising treasury yields is keeping USD in demand.

Chart of the day

US treasury yields have been rising consistently over the course of this month, rising from 3.8% to 4.34% - the highest since March. As a result, the US dollar has been supported since hitting the 100.8/101 support level. Markets have erased around 50 bps of rate cut expectations from the Fed this month following hawkish Fed speak, as well as data supporting the idea that inflation remains sticky. The Fed’s preferred measure of inflation, core PCE, will be out on Friday and a higher number will likely continue this momentum.

Source: Bloomberg Finance L.P.

How can we help?

Our team of currency experts are here to help you get more from your money when making international payments. We will work with you to understand your payment needs and offer specialised guidance on the best options available to you. Over the last 17 years we’ve helped over a million customers and last year alone processed over £6.5bn. We’re tried and trusted, and we’re ready to help you.

Have a great day.


Expert insights on demand

Sign up to our daily market reports to get the latest news and insights on worldwide currency movements straight to your inbox every morning.

Enter your email address below to subscribe.