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1 week ago | 
think.ing.com | František Táborský |Francesco Pesole |Chris Turner
USD: Trade versus geopolitical news The situation in Israel and Iran has shown few signs of de-escalation, and while that is offering intermittent support to the dollar, it has so far failed to generate a major rebound in the greenback. The main geopolitics-FX channel remains oil, whose price action suggests markets believe the worst of the impact may be past us.
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2 weeks ago | 
think.ing.com | Francesco Pesole |František Táborský |Chris Turner
The dollar is stronger across the board this morning after Israel attacked Iran's nuclear facilities. The main transmission channel from this specific geopolitical risk and FX is the price of oil, which has rallied around 8% since the Israeli strike. In other conditions, the DXY rally would likely be much larger than the roughly 0.75% rebound from the overnight lows we have seen so far, because the dollar would also benefit from the negative shock in equities and bonds.
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2 weeks ago | 
think.ing.com | Chris Turner |Francesco Pesole |František Táborský
It is fair to say that dollar price action has been poor. Having spent the last 10 weeks discussing the breakdown in the dollar-US Treasury correlation as the 'Sell America' thesis took hold, investors noticed that the dollar was only too keen to revert to traditional correlations yesterday as the soft CPI sent US Treasuries higher. DXY ended the day some 0.5% weaker – a typical reaction to some bullish steepening of the US yield curve on the view that the Fed had more room to cut.
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2 weeks ago | 
think.ing.com | Francesco Pesole |Chris Turner |František Táborský
This week hasn’t shown a clear direction for the dollar so far. Uncertainty around how far-reaching the US-China trade talks in London will be has left room for domestic factors to shape relative performance across G10 currencies.
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2 weeks ago | 
think.ing.com | Chris Turner |Francesco Pesole |František Táborský
Examining FX performance from both a spot and total return perspective over the last month reveals a bloc of four currencies that stand out. These are the Norwegian krone, sterling and the Australian and New Zealand dollars. What does sterling have in common with these commodity currencies? High yields. Like the krone, sterling offers implied yields over 4% per annum.
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2 weeks ago | 
think.ing.com | Chris Turner |František Táborský |Francesco Pesole
Ever since US President Donald Trump's 'Liberation Day' tariffs were introduced in early April, the FX narrative has really focused on what damage these tariffs would do to the US economy and the dollar. News, then, of a meeting in London today between US and Chinese officials should in theory be good news for the dollar. Presumably, both sides would not be meeting if they felt they couldn't put a deal together.
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3 weeks ago | 
think.ing.com | Chris Turner |Francesco Pesole |František Táborský
Fortunately, the very public fallout between President Trump and Elon Musk has not had broader market implications. Despite the travails for Tesla, the broader S&P 500 was only off 0.5% yesterday and futures now call the S&P modestly higher today. Notably, it's been a quiet week for the US Treasury market, where yields are broadly unchanged. The topic of how the US funds its growing fiscal deficit may be back next week, however, when we see three and 10-year auctions.
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3 weeks ago | 
think.ing.com | Chris Turner |František Táborský |Francesco Pesole
"Slightly pessimistic and uncertain" was the characterisation of the US outlook expressed in the Fed's Beige Book released last night and ahead of the next FOMC meeting on 19 June. Yet business sentiment did not show any clear deterioration over prior Beige Books, and the report also noted that "there were widespread reports of contacts expecting costs and prices to rise at a faster rate going forward". This latter point is keeping the Fed resistant to growing political pressure to cut rates.
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3 weeks ago | 
think.ing.com | James Knightley |Carsten Brzeski |Chris Turner |James Smith
The Trump administration appears to be powering through on its promise to impose sweeping tariff measures despite recent court rulings contesting their legality, but the form they’re set to take remains deeply unclear. How these developments will feed through into the global economy is yet to be determined, but what we do know is that the uncertainty is taking a toll on consumer and business sentiment, fuelling market volatility, and complicating the work of central bankers.
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3 weeks ago | 
think.ing.com | Francesco Pesole |František Táborský |Chris Turner
USD: Dollar rebounds, trade and ISM in focus The dollar showed resilience despite the late-session bounce in Treasury yields, supported by strong April JOLTS job openings. That said, the JOLTS data adds little to the overall jobs picture: the labour market remains tight, while declining quits suggest wage growth is easing.
