USD recovery helped by supportive spreads – Scotiabank
01.10.2024, 11:39

USD recovery helped by supportive spreads – Scotiabank

Softer than expected US PCE data Friday undercut the US Dollar (USD) broadly at the start of the week but the USD has recovered this morning to trade higher overall against its major currency peers, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

USD may strengthen a little more as spreads move favourably

“Fed Chair Powell commented Monday that the Fed was in no hurry to cut rates and will lower rates over time. Meanwhile, soft Eurozone CPI data has boosted expectations that the ECB could cut rates again in October. After winning the leadership vote for Japan’s ruling LDP Party, new Japan PM Ishiba’s government appears more cautious on the economy and the need for tighter monetary policy.”

“Yield spreads have shifted relatively significantly in favour of the USD over the past few sessions, suggesting the DXY may be able to recover a little more ground in the short run at least. Broader trends in the DXY remain negative and index gains may be limited to the 102 area in the coming week or two, however. US equity futures are negative on the session, adding to support for the USD at the margin.”

“Israel’s ground incursion into Lebanon does not appear to be a major factor for markets at this point. Crude oil prices are down in the day but off earlier lows. The data run today brings a little more information on the US labour market via ISM/PMI and JOLTS data. There are a number of Fed policymakers speaking over the course of the day (among them, Bostic, Cook and Barkin are voters this year). US NFP data Friday are the primary focus markets this week, however.”

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