Societe Generale FX Strategy Research notes that political distractions hinder fiscal progress in the US and political uncertainty plays its part in keeping bond yields where they are.
“An optimistic view of the ex-Director of the FBI’s testimony is that is could help reduce the uncertainty, one way or the other.
More realistically, maybe once it’s out of the way the underlying performance of the economy, which is dull rather than weak, will drive markets. If that’s the case, we’d look for slightly higher yields, but not a big enough move to de-rail global yield-hunters,” SocGen argues.
“For now, US yields – especially TIPOS, are holding the lower end of rangers rather than breaking free, and we expect USD/JPY and EUR/JPY to do the same, before moving higher,” SocGen adds.
Source: Societe Generale Cross Asset Research
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