Fed to start reducing its balance sheet | 03 5月 2022

03 5月 2022, GBP/USD

GBPUSD trading plan:

The U.S. benchmark 10-year Treasury yield hit 3% for the first time since December 2018, a psychological milestone that could have major implications for other financial markets. The 10-year yield is an important barometer for mortgage rates and other financial instruments. It has surged the last two months as the bond market prepared for the Federal Reserve to start reducing its balance sheet, which ballooned to nearly $9 trillion, as the central bank bought bonds during the pandemic. The process of unwinding all those purchases is called "quantitative tightening." Reduced buying of government debt by the Fed could help lift yields, which could push those on the longer end of the curve above shorter-dated Treasuries. This is a positive signal for the dollar.

Investment idea: sell 1.2550 and take profit 1.2478.

David Johnson
Analyst of «FreshForex» company
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