FUNDAMENTAL FORECAST FOR THE US DOLLAR: BULLISH
- US Dollar[1] soars as emerging market turmoil stokes haven demand
- Bond auction results and TIC data may cap yields, cooling the rally
- Sentiment boost from US/Japan autos deal may not prove lasting
See the latest US Dollar forecast[2] learn what will drive prices in the third quarter!
The US Dollar would not let a lull in local data flow slow upward progress last week, finding a catalyst in deteriorating risk appetite across financial markets. While the benchmark unit’s unrivaled liquidity was expected boost its haven appeal[3], the simmering US/China trade war was thought to be the likely culprit souring investors’ mood. As it happened, a meltdown in emerging market assets driven by turmoil in Turkey and Russia[4] was the trigger, pushing the greenback to a 14-month high.
The week ahead offers an eclectic mix of would-be stimuli for continued volatility. Retail sales and consumer confidence data will inform Fed policy bets, but it would take an improbably dramatic deviation from forecasts to dislodge status quo expectations. The Economic Symposium in Jackson Hole, Wyoming later this month is likely to be the next real inflection point in the narrative. For now, markets have fully priced in another hike in September and peg the probability of a further increase in December at close to 60 percent.
Elsewhere on the docket, results from a series of bond auctions may generate attention. The markets have been concerned about the growth-negative implications of a spike in borrowing costs as the Treasury seeks to finance a yawning deficit amplified by a $1.5 trillion tax cut and $300 billion in increased
