Dollar starts new week on firm footing as US T-bond yields extend rally

The greenback is gathering strength in the early hours of the European session on Monday as investors stay focused on the US Treasury bond yields in the absence of significant fundamental drivers and high-tier data releases. September Industrial Production data will be featured in the US economic docket in the second half of the day but the market mood alongside the performance of US T-bond yields is likely to continue to impact the USD’s valuation.

Earlier in the day, the data from China revealed that the Gross Domestic Product (GDP) expanded by 0.2% on a quarterly basis in the second quarter after growing by 1.3% in the second quarter. This reading missed the market expectation of 0.5% and caused risk sentiment to sour during the Asian trading hours.

The US stocks futures are down between 0.1% and 0.3%, suggesting that Wall Street’s main indexes are likely to open not too far away from Friday’s closing level. On a weekly basis, the S&P 500 and the Dow Jones Industrial Average rose 1.8% and 1.6%, respectively. In the meantime, the benchmark 10-year US Treasury bond yield is up nearly 2% at 1.605%.

Gold suffered heavy losses in the second half of the previous week as the precious metal remains extremely sensitive to movements in the US T-bond yields. XAU/USD is currently moving sideways in a relatively tight range around $1,770 but the pair could feel renewed bearish pressure when trading volume rises with European and American traders entering the market.

EUR/USD’s recovery attempt failed to convince investors that the pair was about to reverse its direction. The European Central Bank’s dovish outlook remains intact and makes it difficult for the common currency to find demand. On Monday, the pair is trading in the negative territory below 1.1600.

USD/JPY stays relatively calm after posting its strongest weekly close since March 2017 at 114.20. Rising US T-bond yields continue to fuel the pair’s upside.

GBP/USD managed to close the second straight week in the positive territory and seems to have gone into a consolidation phase above 1.3700. The Bank of England’s hawkish policy outlook and renewed Brexit optimism help the British pound stay resilient against the dollar.

Despite rising copper prices, the AUD/USD pair edges lower on Monday pressured by the disappointing Chinese growth data.

Cryptocurrencies: Bitcoin continues to trade above $60,000 as crypto investors wait for the first Bitcoin ETF to debut in the US either on Monday or Tuesday. Ethereum stays within a touching distance of $4,000 and Ripple is fluctuating around $1.1.

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