The EUR/USD made a bullish breakout as US treasury yields continued rising and after the relatively strong EU confidence data. The pair rose to a high of 1.2230, which was its highest level since January 8.
Rising US yields
The US dollar index dropped by more than 0.40% as the US Treasury yields continued to rise. The yield of the ten-year rose to 1.40%, the highest it has been since February 2020. This is a substantial increase from last year’s low of 0.50%. Similarly, the five-year rose to 0.50%, its highest level since March last year as shown below.
The yields are rising ahead of a Congressional vote on Joe Biden’s $1.9 trillion stimulus package tomorrow. This package will allocate funds to individuals, select companies, and states and local governments.
Economists at leading banks and forex brokers believe that the new stimulus will lead to a higher inflation. Indeed, this trend has already started. In the most recent release, the statistics bureau said that the headline CPI rose to 1.4% in January. As such, there is a possibility that the stimulus will supercharge it to 2.0% and above.
The EUR/USD is also rising after the strong consumer and business confidence data from the European Union. According to the European Commission, consumer confidence increased from -15.5 in January to -14.8 in February, in line with expectations. In the same period, the business and consumer survey increased from 91.5 to 93.4.
Meanwhile, the services sentiment increased slightly from -17.7 to -17.1 while that of the industrial sector rose from -6.1 to -.3.3. This improvement was mostly because of the ongoing vaccination drive and
