The dollar rallied sharply on Tuesday: the $-Index climbed +0.8% to 103.4, breaking out of the 102.1/102.7 corridor in which it had stagnated since January 3, and returning to its best levels since mid-December.

The greenback jumped +1% against the yen (to 147.25), +0.7% against the Swiss franc, +0.8% against sterling and the same against the euro, which retreated to 1.0865.

The greenback was supported by the sudden rise in the yield on 10-year US Treasury bonds: +12.7 basis points to 4.0770%, despite the poor Empire State index.
Clearly, doubts are re-emerging as to the imminence of an FED rate cut as early as the 2nd decade of March: the consensus, which was over 2/3 before the long weekend (Monday was a bank holiday), is beginning to crack.
The best proof of this is that the day's poor figures have at no point halted the deterioration in US Treasuries, with the '2-yr' seeing its yield jump +11Pts from 4.138 to 4.248%, returning to its level at the end of 2023.

The '30 yr' jumped +10Pts to 4.312%, from 3.945% on 12/27, i.e. +37Pts in 15 days.

However, the 'Empire State' manufacturing activity in the New York region continued to contract sharply in January, rising from -14.5 to -43.7, its lowest level since May 2020.
What a cold shower: economists were instead forecasting a rise in this indicator to around -5.
The new orders sub-index deteriorated to -49.4, from -11.3 in December, while the component measuring the number of hours worked deteriorated to -6.1, from -2.4 in December, highlighting a weakening labor market.

In Europe, the ZEW index of German investor sentiment edged up by +2.4pts to 15.2 points, compared with December 2023... but Germany continues to suffer from freeway and city-center blockades (farmers and truckers opposed to the abolition of fuel rebates).



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