U.S. retail sales came in close to expectations, while the Philadelphia Fed Manufacturing Index surprised sharply to the upside, likely reflecting improved business sentiment following the Middle East ceasefire and the decline in oil prices.
Housing data, however, remained soft
Despite the mixed economic backdrop, Treasury yields pushed higher, with both the 2-year and 10-year yields rising around 4 basis points. Fed Chair Kevin Warsh also helped shape the market narrative, reiterating that the Federal Reserve’s balance sheet remains too large and should be reduced over time. That has fueled speculation that more aggressive balance sheet runoff could increase Treasury supply, putting upward pressure on yields.
Higher long-term rates can tighten financial conditions without requiring additional Fed rate hikes, helping restrain inflation while continuing the balance sheet normalization process. The rise in Treasury yields has given the U.S. dollar fresh support. In the video above, I quickly review the technical outlook for the major currency pairs, highlighting the bias, the key risks, and the important technical levels to watch.