Rising yields captured the focus of FX markets last week, as the dollar bounced back into action with US equities also feeling the pain. The question for markets now is where do we go from here? Many have already suggested that central banks will start to intervene further in bond markets to keep borrowing costs low and aid the economic recovery, but with the Fed taking a relatively laissez-faire attitude about the bear steepening of the Treasury curve, this could result in the greenback taking another leg higher.
Next week, the focus will be on the Reserve Bank of Australia as it is the first G10 bank to release a policy decision since the meteoric rise in yields, while fiscal stimulus packages from the UK and US will remain in scope.
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