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Treasury Yields Finish Week Higher Underpinned by Hawkish Fed Minutes

The Fed minutes showed policymakers were confident in the current path of interest rate hikes, saying that a series of gradual rate hikes was the correct strategy in helping to maintain a stable economy. The minutes also showed central bankers were wary of “excesses” in financial markets.

U.S. Treasury yields finished higher on Friday and for the week as investors continued to react to Wednesday’s hawkish Fed minutes and a continuing bullish outlook for the labor market.

The Fed minutes showed policymakers were confident in the current path of interest rate hikes, saying that a series of gradual rate hikes was the correct strategy in helping to maintain a stable economy. The minutes also showed central bankers were wary of “excesses” in financial markets.

On Friday, the 2-year U.S. Treasury note settled at 2.908 percent. The week-ending October 12, it settled at 2.840. The 10-year U.S. Treasury note yield finished at 3.196 percent. The week-ending October 12, it finished at 3.141 percent.  The 30-year U.S. Treasury bond yield closed at 3.379 percent. The week-ending October 12, it finished at 3.299.

Forex

The U.S. Dollar settled lower against a basket of currencies on Friday with much of the selling pressure attributed to a strong turnaround in the Euro which represents about 57 percent of the value of the dollar index.

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On Friday, the December U.S. Dollar Index settled at 94.433, down 0.195 or -0.20%.

The EUR/USD rebounded from 1.1433, just one tick above the October 9 bottom at 1.1432, after Bloomberg News reported that British Prime Minister Theresa May is ready to drop a key Brexit demand in order to make a deal for Britain to leave the European Union (EU).

May is willing to drop a requirement on the issue of the Irish border, which has impeded the two parties coming to an agreement. Bloomberg reported, citing anonymous sources.

According to CNBC, EU negotiator Michel Barnier earlier said that a Brexit deal was 90 percent done, but warned that failure to resolve the Irish border question could derail any agreement. The Euro was burdened all week by delays in the two parties reaching an exit deal.

Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures rose on Friday on signs of strong demand in China, the world’s No. 2 oil consumer. Prices, however, remained under pressure for a second week on rising U.S. inventories and concern that the on-going trade disputes were curbing economic activity.

December WTI crude oil closed at $69.28, up $0.57 or +0.82% and January Brent crude oil finished at $79.26, up 0.51 or +0.64%.

Gold

Gold futures hemmed and hawed most of the session before settling slightly lower on Friday. The range was relatively tight last week, but buyers still managed to post a third week of gains. A mixed performance in the stock market led to a choppy, two-sided trade.

December Comex Gold settled at $1228.70, down $1.40 or -0.11%.

Heightened stock market volatility provided support most of the week, but hawkish Fed minutes and rising Treasury yields may have put a cap on gains.

This article was originally posted on FX Empire

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