Currencies and equities traded sharply lower on Tuesday as Treasury yields hit pre-COVID highs. The 10-year yield rose to its highest level since January 2020 while 2 year yields rose above 1% for the first time since February 2020.
Stronger than expected earnings drove the Dow Jones Industrial Average to record highs. Despite Delta variant fears, rising prices and supply chain shortage, bulge bracket U.S. companies are thriving. More than 85% of S&P 500 companies that reported as of Tuesday beat expectations in the third quarter. Results like these hardens the case for tapering by the Federal Reserve in November. Normally, the prospect of taper should be positive for the dollar and in many ways, it has for USD/JPY which rose to its strongest level since November 2017. However, that’s where the greenback’s gains end as it traded lower against other major currencies.
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