USD: Currencies Get Reprieve from USD Rally – Scotiabank
|The US Dollar (USD) rally may be coming off the boil. A lower close for the Dollar Index (DXY) yesterday signals some—potential—technical headwinds for the index for starters and markets may be getting a little concerned about one of the essential drivers of the October rebound, Scotiabank’s Chief FX Strategist Shaun Osborne notes.
USD stabilizes as rally shows signs of maturing
“Rising Treasury yields have provided strong tailwinds for the USD amid still resilient economic data. But there is evidence that some of the firming trend in yields is the result investors demanding a greater premium for holding long term US Treasury debt. The NY Fed’s estimated term premium has nudged up to around 20bps, likely reflecting concerns about tariff risks and US fiscal sustainability as the US presidential election race tightens.”
“Stocks are up slightly while bonds are mixed—European debt is (mostly) a little softer while US Treasurys are outperforming modestly. Positive US data surprises have been running at their strongest since the spring, reflecting both the resilience of the US economy and market observers underestimating the durability of growth momentum. Durable goods are expected to fall 1.0% in September, with the ex-transport figure expected to fall just 0.1%.”
“Better than expected data might give the USD a small lift today but an overbought DXY looks increasingly prone to some, minor at least, corrective losses. Weakness in the index below 104 may prompt a further decline towards 103.40/50. Note Japan goes to the polls this weekend, with the ruling LDP at risk of losing its lower house majority.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.