USD mixed to lower amid stock volatility – Scotiabank

The US Dollar (USD) is mixed to weaker in what is a rough start to the week for markets. Stocks are trading sharply lower following the emergence of a Chinese AI startup — DeepSeek — which could potentially challenge the US’ dominance in the field (and take some steam out of tech valuations). US equity futures reflect a near 4.1% drop in the Nasdaq 100, with the S&P 500 down 2.3%. Both are trading off early lows, Scotiabank's Chief FX Strategist Shaun Osborne notes. 

USD loses ground to havens

"European markets are down, but losses are less severe. Bond are bid and part of the USD’s slippage can be accounted for by the sharp fall in bond yields — US 10Y yields are down 12bps on the session while European government 10Y debt yields are down 5-7bps. Haven demand has spilled over into FX, with the JPY surging 1.3% and the CHF gaining 0.9% on the session." 

"USD losses today add to the slide seen over the past two weeks amid as President Trump’s broad and severe tariff threats recede — to some extent. The DXY looks poised to extend losses in the short run and retest the late Nov/early Dec levels for the DXY in the low 106s." 

"Focus will shift to interest rate policy later this week, with Fed likely to hold rates steady amid slow progress on inflation, resilient growth and the FOMC probably wanting time to assess the potential impact of the new administration’s policy priorities. Steady rates may prompt a response from the president—who has made it clear that he thinks rates should be lower."