The pound hit a fresh 10-month high against the dollar, while the euro hit a two-month high as the dollar retreated again on market bets that the end of the US rate hike cycle is nearing.
Sterling hit $1.2476, its highest level since June 2022, and was last below that level, up 0.42%.
The euro hit $1.0939, its highest level since early February, and was last up 0.18% at $1.0922.
US and European government bond yields retreated sharply last month as investors rushed to buy safe-haven assets amid a volatile banking sector. Although they recovered slightly, they remain below recent levels.
Germany’s two-year yield retreated 70 basis points since March’s data, last at 2.688%, but the US’s moves were even harder.
US two-year yields last at 3.9979%, down a full percentage point from early March, after the banking meltdown fueled traders’ renewed expectations that the Federal Reserve was yet to increase rates.
The latest statistic to support this was Monday’s Institute for Supply Management report, which showed that manufacturing activity decreased to its lowest level in three years. The PMI is below the 50 thresholds for the first time since 2009.
Traders still expect the European Central Bank to raise rates soon.
The play also had technical directions, particularly for the pound, suggesting further gains could be in store.
The dollar advanced to 132.85 against the Japanese yen, while the US dollar index, which tracks the unit’s relationship with a basket of currencies, retreated 0.1% to 101.93. 1.2449 was a huge technical chart resistance. This year it was twice as high. A break of this indicates that this is the starting point for new sterling buyers, a short covering area for sterling statistics.
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