It's time for G10-FX traders to start monitoring the US-China 10-year spread as an increasingly indicative factor in USD dynamics, states Ashraf Laidi of

Here is a chart below of US-China 10-year yield spread vs DXY. There are leads and lags but it's worth adding to your FX toolbox.  Meanwhile, indices are attempting to maintain the risk-on mood. This is especially visible in GBP/USD, which has risen to a fresh high since 2018. GBP is the second-highest-performing currency YTD (after NOK). The dollar is broadly weaker this week so far. CFTC positioning data finally showed a crack in the crowded euro long.

GBP Party & China Yield Spread - Us China 10 Yr Spread Feb 9 2021 (Chart 1)

If this was a “normal” year then all the talk in the FX market might be around sterling. The UK's Brexit deal and pivot away from austerity puts it in a spot to outperform and that's just what it's been doing. It's the best performer so far in 2021 despite being ravaged by a new Covid variant and lockdowns.

The market everywhere is laser-focused on the post-Covid economy and the UK is quickly vaccinating its population and will no doubt have a massive social boom after the re-opening. Data Tuesday from Barclaycard showed overall consumer spending down 16.3% y/y with spending in pubs and bars down nearly 94%.

There is tremendous pent-up demand in the UK that's been doubly held down by Brexit uncertainty. We're now months away from the end of both and the UK is also preparing another fiscal package for March.

To be sure, cable benefitted from broad USD weakness Tuesday but there are reasons for optimism ahead.

CFTC Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.

EUR +137K vs +163K prior
GBP +10K vs +18 prior
JPY +45K vs +45K prior
CHF +15K vs +10K prior
CAD +14K vs +14K prior
AUD -1K vs +1K prior
NZD +12K vs +15K prior

We've been lamenting the lack of enthusiasm in speculative forex futures for weeks (months?) but they've finally stepped up with a bit of a shift. The brief moment in the sun for the euro is looking more vulnerable even if the latest foray below 1.20 has been bought.

Learn more about Ashraf Laidi at

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