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Europe

• Gains across the board to begin the session: Eurostoxx +0.5 percent, Germany DAX +1.2 percent, France CAC 40 +0.6 percent, United Kingdom FTSE +0.6 percent & Spain IBEX +1.1 percent
• Europe is taking some cues from Wall Street’s upbeat tone yesterday. On the whole, the risk mood is more positive, with S&P 500 futures currently up 0.2 percent. Despite higher bond yields, stocks are still breathing a sigh of relief, and sentiment is expected to improve even further.
• Coming into today, the S&P 500 is on the verge of testing its February highs, so keep an eye on that.

Bonds

• The bond selloff isn’t going away anytime soon • Treasury yields continue to rise on the day • 2-year yields are up nearly 4 basis points to 2.42 percent, while 10-year yields are up 2.5 basis points to 2.50 percent. An inversion of the 2s10s appears to be imminent, but the market may have already accepted this. I’ll save the recession indicator discussion for another time, but be wary of that signal, which will be noticed by the broader markets as well. As things stand, the bond market selloff is still ongoing. It’s difficult to fight the current momentum, as has been the case with yen pairs throughout March trading.
• Whether the focus is on rates or inflation – or even both – the pace of the selloff has already been brutal. The question now is, “How do we proceed from here?” One way the market could satisfy its desire to hint at a Fed policy blunder.
• It’s difficult to say for certain, but in situations like these, the charts rarely lie. If nothing else, keep an eye on this long-term channel in 10-year Treasury yields.

SNB

The SNB introduces the possibility of repo rate transactions being indexed to the policy rate. The Swiss central bank says it will increase its flexibility in directing money market interest rates. This will be added to the SNB’s monetary policy toolkit in the future, but not before some test operations are carried out. For the time being, the central bank implements monetary policy by setting the SNB policy rate, so this simply adds another tool to their arsenal. The key policy, on the other hand, is the main weapon in the arsenal.

Dollar

• The dollar is slightly weaker to begin the session.
• The greenback is losing ground in European trading.
•  EUR/USD has risen from 1.0990 to 1.1015 and is approaching a test of its 200-hour moving average at 1.1018. There are large expiries for the pair at 1.1000 in the coming days, which could contribute to price action becoming more sticky. Meanwhile, the dollar is seen losing some ground against the pound, the Australian dollar, and the Canadian dollar. GBP/USD is moving back up to just above 1.3100, while AUD/USD is also rising slightly to just above 0.7500. However, USD/JPY remains the key pair to watch in my opinion, and this has not changed since the final stages of Asian trading.
•  Following a drop to 123.10, the pair is now trading around 123.50-70. Buyers have a firm grip on the market in the short term, as price action remains above key hourly moving averages. After hitting the psychological level of 125.00 yesterday, there was some profit-taking.