The US Dollar (USD) is trading broadly lower on the day. Stocks are trading mixed (mostly lower in Asia, firmer in Europe, with US equity futures mixed) while bonds are broadly higher across the major markets. Treasurys are outperforming and the modest decline in US yields from yesterday’s peak (5-6bps for the 10Y) is perhaps enough to reason away the USD slippage, Scotiabank’s Chief FX Strategist Shaun Osborne notes.
“A soft-sounding Beige Book release yesterday, which noted flat economic activity across most districts since early September, contrasts with the generally positive (and broadly better than expected) hard data reports from the US economy over the recent past. The USD dipped slightly following the release which gives Chair Powell the cover to ease policy November.”
“Swaps continue to reflect some 23bps of anticipated easing at the next policy decision. Beyond that, markets continue to ponder the outlook for rates amid resilient US growth and the potential for a Trump win in the presidential election unleashing generous tax cuts and global tariffs. That policy combination would boost domestic growth prospects and lift inflation risks.”
“The USD still looks very stretched to me from a short/medium-term point of view but it is likely to remain well-supported on minor pullbacks at least until the outcome of the presidential election is known. The data round picks up a little this morning, with the US releasing weekly claims, New Home Sales, PMIs and some regional Fed activity surveys.”
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