The recent FX market behaviour mirrored the first step of the 2013 taper tantrum when low yielding currencies remained reasonably supported vs. the USD, while the downturn was concentrated in the emerging FX high yielding segment. Although stock markets have recently been down, this has been relatively moderate so far, with the increase in commodity prices underscoring the economic growth-led nature of rising bond yields rather than any imminent investor worries about the punch bowl being taken away by the Fed. We expect Fed Chair J. Powell to strike a balanced message on the latter between expressing confidence in the recovery and keeping tapering speculation muted. This should keep the USD in check and help cyclical FX on the upside. USD will only witness across-the-board intensity when the surge in US yields becomes more disorderly and spills violently into risk assets.
#XAUUSD #ANALYSIS
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