The yield on 10-year US bonds has reached its highest level in 16 years, causing a ripple effect across the market. This has resulted in the US dollar gaining strength, with the USD/JPY pair testing levels above 149.00. Meanwhile, equities are experiencing a decline, with S&P 500 futures down by over 0.5%. Consequently, the Australian dollar (AUD) and New Zealand dollar (NZD) have also hit their lowest points for the day, with AUD/USD falling 0.3% to 0.6404 and NZD/USD down 0.3% to 0.5950.
As we look ahead to the European market opening, it appears that risk trades are bleak, benefiting the US dollar in the process. The increase in US bond yields has caused a surge of uncertainty and unease within the market, leading investors towards safer investments such as the greenback. This, coupled with the decline in equities, has put additional pressure on riskier currencies like the Australian and New Zealand dollars.
Overall, the current situation paints a gloomy picture for risk trades. The US dollar is being bolstered by the rise in bond yields and the resulting apprehension in the market. As a result, the Australian and New Zealand dollars have weakened, adding to the downward trend in equities. It remains to be seen how this will play out in the European market, but for now, the dollar seems to be the currency of choice for many investors.