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3 NEWS 28.9.2023 LEJLA FIL-PARK Ikel, Saħħa u Sport TA' SETTEMBRU PM SA PM ILPARK NAZZJONALI TA' QALI PICNIC AREA JIPPREŻENTAW DANUSAN DĦUL B'XEJN Żvilupp Sostenibbli FROM PAGE 1 "It's clear now that markets see higher long-term yields in the US for a longer pe- riod. at's the main driver for the dollar here," said Dane Cekov, senior FX strate- gist at Nordea. "It's been a while since we've seen 10- year yields at 4.5%." Fed officials have in recent days flagged the possibility that the central bank would need to raise interest rates further, after it kept rates steady last week but stiffened its hawkish monetary policy stance. at has sent US Treasury yields to multi-year highs as money markets have adjusted their expectations of where US rates could peak, and for monetary con- ditions to remain tighter for longer than initially thought. e benchmark 10-year yield was last at 4.503%, after hitting a 16-year high of 4.566% in the previous session. e two- year yield stood at 5.047%. Euro To dollar forecast Foreign exchange analysts at ING Bank suggest the Euro (EUR) it tipped to fall against the US Dollar (USD) in the near term outlook, targeting a floor of 1.05, citing "the growth differential between the eurozone and the US, a lingering high real USD rate and an unstable risk envi- ronment point." However, the FX strategists warn that a deeper drop to the 1.02 level can't be ruled out. Central to this currency forecast is the rising strength of the US Dollar, propelled further by the narrative of the Federal Re- serve. As higher yields emerge, a mirror effect is witnessed in the treasury yields, and the forex market feels this pulse distinctly. "We simulated a scenario where the 10- year Treasuries hit 5.0%, based on the past year of EUR/USD coefficients. We estimate the pair would be trading around 1.02 with 5.0% 10Y yields," says Francesco Pesole, FX Strategist at ING Bank. is projected scenario implies a rough- ly 3.5% reduction from the currency pair's current position, echoing the trend seen when UST 10Y yields moved from 4.0% to their present 4.50%. "e rewidening of the USD:EUR short- term rate differential in the past few months has been another driver of EUR/ USD depreciation," the analyst adds. Swap rates is rate expansion primarily stems from the uptick in US swap rates. is progression is uninfluenced by any significant alterations in EUR rates. Given the underlying volatility of US swap rates due to the Federal Reserve's actions, it is anticipated that the EU- R:USD short-term swap rate differential will be primarily propelled by the dollar's performance. Amid this backdrop, it becomes per- tinent to assess the potential moves and their implications on the EUR/USD cur- rency pair. "Expectations of Fed easing... have been driving most dollar moves of late, and markets are now attaching a greater weight to the 2024 dot plot projections," Pesole said. ere's an evident shift in market sen- timents with market players leaning towards the 2024 dot plot outlooks, a strong indication of the Federal Reserve's future actions. A more granular view reveals that the gap between the current end-2024 im- plied rate and the recent median dot plot for that year isn't as vast as before, limiting the scope for further hawkish repricing. Moreover, the strategist points out that the Federal Reserve has limited oppor- tunities left this year to stay true to its "promise" to increase rates. "e room for a hawkish repricing is now substantially smaller than it was in June," the analyst added. ere's a palpable expectation within market circles of the US back-end yields retaining their high trajectory. Despite this, predictions around the EUR/USD exchange rate remain cau- tious. Potential bearish pressures on the dol- lar's shorter end may be limited, but the longer-term implications of US bond ac- tions cannot be discounted. "All in all, we estimate 1.02 as the most likely bottom for EUR/USD in a scenar- io where the US bond sell-off continues," Pesole said. Euro vs Dollar: A deeper drop to the 1.02 level 'can't be ruled out'

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