News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Bearish
Oil - US Crude
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Wall Street
Mixed
Gold
Bullish
GBP/USD
Bullish
USD/JPY
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
More View more
Real Time News
  • Heads Up:💶 Retail Sales YoY (MAR) due at 09:00 GMT (15min) Expected: 9.6% Previous: -2.9% https://www.dailyfx.com/economic-calendar#2021-05-06
  • Heads Up:🇦🇺 RBA Debelle Speech due at 09:00 GMT (15min) https://www.dailyfx.com/economic-calendar#2021-05-06
  • Why financial market traders must monitor both monetary and fiscal policy? Find out from @MartinSEssex here: https://t.co/Fkzk88Y5gm https://t.co/ffKynOknhM
  • 🇬🇧 Markit/CIPS UK Services PMI Final (APR) Actual: 61.0 Expected: 60.1 Previous: 56.3 https://www.dailyfx.com/economic-calendar#2021-05-06
  • 🇬🇧 Markit/CIPS Composite PMI Final (APR) Actual: 60.7 Expected: 60 Previous: 56.4 https://www.dailyfx.com/economic-calendar#2021-05-06
  • Heads Up:🇬🇧 Markit/CIPS UK Services PMI Final (APR) due at 08:30 GMT (15min) Expected: 60.1 Previous: 56.3 https://www.dailyfx.com/economic-calendar#2021-05-06
  • Heads Up:🇬🇧 Markit/CIPS Composite PMI Final (APR) due at 08:30 GMT (15min) Expected: 60 Previous: 56.4 https://www.dailyfx.com/economic-calendar#2021-05-06
  • 🇳🇴 Norges Bank Interest Rate Decision Actual: 0% Expected: 0% Previous: 0% https://www.dailyfx.com/economic-calendar#2021-05-06
  • British Pound Aims Higher with BOE Stimulus Unwind in Focus - https://www.dailyfx.com/forex/fundamental/daily_briefing/session_briefing/euro_open/2021/05/06/British-Pound-Aims-Higher-with-BOE-Stimulus-Unwind-in-Focus.html?CHID=9&QPID=917708&utm_source=Twitter&utm_medium=Spivak&utm_campaign=twr #GBP #BOE #SuperThursday https://t.co/3MQfieEU3g
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Silver are long at 90.28%, while traders in France 40 are at opposite extremes with 78.36%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/37chG31FJd
US Recession Watch - US Yield Curve Inverts, But Panic When it Steepens

US Recession Watch - US Yield Curve Inverts, But Panic When it Steepens

Justin McQueen, Analyst

US Treasury Curve Inversion Analysis and Talking Points:

  • US 2s10s Treasury Curve Inverts for the First Time Since 2007
  • Yield Curve Inversion: Predictor of Recessions
  • Panic When the Yield Curve Steepens

See our quarterly FX forecast to learn what will drive prices throughout Q3!

US 2s10s Treasury Curve Inverts for the First Time Since 2007

The US 2s10s curve has inverted for the first time since 2007, however, this had been a long time coming given the deep inversion in the 3M-10yr curve. Alongside this, while today’s inversion is seen as more symbolic, it does provide yet another reminder in regard to rising fears of a slowdown in the global economy, particularly noted in the global bond market as yields drop towards record lows (US 30yr now yielding an all-time low of 2.06%).

Why Does the US Yield Curve Inversion Matter?

Market Reaction to Symbolic Inversion

In reaction to the 2s10s inversion, safe havens had benefitted with USDJPY dropping to session lows of 106.13, gold pushed towards its best levels of the day at $1508, while US equity futures headed lower, although moves have been relatively contained thus far. In turn, this increases the importance of next week’s main focus in the form of the Jackson Hole Symposium, which quite fittingly is titled the “Challenges of Monetary Policy”.

USDJPY Price Chart: 1-minute Time Frame (Intra-day)

US Recession Watch - US Yield Curve Inverts, But Panic When it Steepens

S&P 500 Price Chart: 1-minute Time Frame (Intra-day)

US Recession Watch - US Yield Curve Inverts, But Panic When it Steepens

Yield Curve Inversion: Predictor of Recessions

While an inversion of the US yield curve has been a reliable indicator for warning of an economic recession, predicting the past 5 recessions and almost all US recessions in the past century. The actual inversion is unlikely to cause an immediate concern given that it usually takes 20 months before a recession hits the economy.

US Recession Watch - US Yield Curve Inverts, But Panic When it Steepens

Source: DailyFX

Panic When the Yield Curve Steepens

As mentioned above the US yield curve has been reliable in regard to predicting recessions, however it does not provide a great signal as to when a potential recession will happen. Instead, investors should really fear the yield curve steepener given that it is closer to the actual event, as such, the steepening of a yield provides the near-term signal that a slowdown has arrived. Consequently, over the past 5 recessions the steepening of the yield has happened at a time when a slowdown has been imminent.

US Recession Watch - US Yield Curve Inverts, But Panic When it Steepens

FX TRADING RESOURCES:

--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES