EUR/USD Withdraws in the Direction of 1.1000 on Bond Rout Before Powell Speech

Downward Pressure Continues for the Pair

The EUR/USD pair continues to be under pressure in the vicinity of 1.1025 as the US dollar resists extended losses from the previous day as the European session kicked off on Wednesday morning. Another factor that posed a challenge to the major pair is the prevailing cautious mood that has held the market while waiting to hear statements from the Federal Reserve’s Chair, Jerome Powell, as there have been unprecedented losses in the bonds market.

EUR/USD price chart. Source TradingView

While the market and financial analysts hold Powell’s comment earlier in the week responsible for the recent slump, the St. Louis President of the Federal Reserve, James Bullard, and the Cleveland Federal Reserve President, Loretta Mester, have been the latest people to support a 50 basis points increase in interest rates. It should also be noted without prejudice that the widespread speculation that there will be up to 190 basis points of the interest rate increase in total by the end of the year is equally weighing on the American Treasury bond yields. 

The Treasury and the Sanctions

That noted the American ten-year Treasury bond yield has had a renewal of its highest point since May 2019 about 2.41% at the most recent whereas the two-year Treasury bond yields record 2.19% at the time of putting this piece together. It later renewed the three-year high points to 2.198% in a few minutes. 

Even at that, the US dollar is struggling to cheer the profits of the Treasury bond yields as the market patiently expects the central bank to get back to normal times when it is finished fighting the challenges of inflation, probably after the war between Russia and Ukraine is done with.

Talking about the war between Russia and Ukraine, the latest relaxed position taken by the latter is failing to yield positive results as Russia’s warships continue to lay siege to the port city of Mariupol. Western sanctions on Russia are also posing a challenge to the improvement of the situation. The Wall Street Journal recently reported the plans of the Biden administration to sanction more than 300 lawmakers from Russia while they also show a willingness to seize Russia’s gold reserve in the United States.

On the other side, policymakers in Europe are divided when it comes to the sanctions against Russia as a result of their reliance on Russian oil and gas imports. There is a consequent criticism of the Eurozone by market players and it highlights the bloc’s meeting coming up this week.  

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