Financial markets remain heavily influenced by geopolitical uncertainty stemming from the escalating tensions in the Middle East.
The latter increased demand for safe-haven assets and lifted US Treasury yields. The dollar rose on Thursday near a multi-week high, while the 10-year Treasury yield continued to climb.
The move reflects growing inflation concerns fuelled by rising oil prices as tensions around the Strait of Hormuz threaten global energy supply routes.
Additionally, recent economic indicators have reinforced the perception that the US economy remains resilient.
The ISM Services PMI data for February surprised to the upside, reaching multi-year highs and following an earlier positive surprise in the manufacturing figures. Labour market data also contributed to the upward pressure on yields and the dollar, with the February ADP report showing job creation well above expectations.
Attention now turns to the upcoming Non-Farm Payrolls report. Markets expect around 59,000 new jobs, a noticeable slowdown from January’s stronger reading.
A weaker outcome would reinforce expectations of monetary easing and could cap the dollar’s advance while limiting the upside for yields. Conversely, a stronger print would support the current narrative of economic resilience, likely sustaining upward pressure on both the dollar and Treasury yields as markets reassess the pace of policy easing.
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