EURAUD volatile, NZD drops on housing reform, and US Treasury yields retreated to below 1.6%

• EURAUD exchange rate volatile ahead of Australia’s PMI projections
• NZD drops sharply as the government attempts to cool down the housing market
• USD in demand amid European lockdowns and international political turmoil
• US 10-year Treasury yield retreated to below 1.6%

Last week we saw EURAUD trended downside after opening the week with 1.5404, but it nevertheless managed to close the week in the region of 1.5450. This week’s movement has been quite volatile so far with multiple ups and downs, currently trading at 1.5585 at press time. On EUR, investors are cautious to buy the currency due to concerns over pandemic lockdowns; on AUD, the currency is largely trade-correlated and has been struggling since the start of this week due to the dropping prices on oil and metals. Today’s session we will see the release of March PMI projections for many major economies including Australia and the Eurozone. Later in the week, German and Eurozone confidence data will also be published which may likely impact the movement on local currencies as well.

NZD plummeted on Tuesday, down about 1.94% on that day. This is largely due to the housing controls introduced recently. As New Zealand’s economy recovers from the pandemic, one of the unwanted results is property boom. Investors are taking advantage of cheap mortgages to buy houses and significantly boosted housing prices. Accordingly, the government has introduced several measures to cool down speculation and curb prices in fear of housing bubbles, but this step has inevitably impacted the currency in a negative direction. FX traders are quick to react, leading to a sharp decline in NZD.
Safe-haven USD approached a four-month high on Wednesday as demand rises amid concerns over Europe and political environment, including recent human rights sanctions on China from the US, EU and Britain and prompted retaliatory measures from Beijing. On the macro front, Yellen was testifying earlier along with Powell and reiterated that a near-term spike in inflation is only transitory. This has helped chill Treasury yields, which retreated from 1.7540% to below 1.6%, currently trading at 1.594% at press time. Both Yellen and Powell are also scheduled to testify to the Senate Banking Panel on Wednesday.