EUR/USD Declines As US Treasury Yields Continue to Rise

EUR/USD declined today ahead of tomorrow’s European Central Bank meeting. The US dollar also rallied against other most-traded currencies, supported by rising US Treasury yields.

Wednesday was light on macroeconomic reports, therefore traders turned their attention to other fundamental factors. In particular, they focused on rising US Treasury yields, with the 10-year note hanging above 3% at the highest level in three years. As higher yields reflect expectations of higher interest rates, market participants resumed speculations about the possibility of four interest rate hikes in total by the Federal Reserve this year.

Yet more immediate concern for traders was tomorrow’s ECB policy meeting. While no changes to the policy are expected, it will be interesting to what the central bank says in its statement. Economists expected the ECB to address softness of the recent macroeconomic reports, perhaps striking a more dovish tone.

EUR/USD dropped from 1.2232 to 1.2181 as of 16:48 GMT today. GBP/USD fell from 1.3976 to 1.3948. USD/JPY gained from 108.80 to 109.31.

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