The euro came under pressure on Tuesday, falling below the $1.14 mark. In the evening, the common currency was down 0.7 percent at $ 1.1323. In contrast to the euro, the dollar appreciated against many currencies. The trigger was a sudden increase in capital market interest rates in the USA. The background to this is increasing speculation that the US Federal Reserve will raise interest rates as a result of high inflation. The markets are currently expecting the Fed to raise interest rates up to four times this year.
In anticipation of rising interest rates, investors dumped bonds from their portfolios. In return, the yield on the ten-year federal bond rose to minus 0.002 percent and thus moved within the range of positive values. Investors would then receive money for their loans to the German state for the first time since the beginning of May 2019. Before the meeting of the US Federal Reserve in the coming week, investors’ interest rate expectations have increased significantly, said Thomas Altmann, portfolio manager at asset manager QC Partners. “The black zero for 10-year Bunds is within reach.” Yields on two-year US Treasury bonds, which are considered an indicator of interest rate expectations, rose above 1% for the first time since February 2020 and exerted a suction effect.
Meanwhile, fears of shortages pushed oil prices to a seven-year high. The price for the North Sea variety Brent rose by 1.7 percent to $87.96. Experts pointed to the recent tensions in the Yemen conflict as one reason for the increase. Oil prices have been soaring for some time. In the first few weeks of this year alone, the Brent price rose by around twelve percent after the price had risen by around half last year.