US DOLLAR FUNDAMENTAL FORECAST: BULLISH
- US Dollar[1] erases prior week’s losses after hawkish FOMC[2] meeting minutes
- Renewed risk aversion reveals USD[3] behaving like a haven asset once again
- Lingering headwinds warn sentiment may sour further, US Q3 GDP on tap
See our US Dollar forecast[4] to learn what will drive prices through the end of the year!
The US Dollar has all but erased losses sustained against the backdrop of the prior week’s market rout[5]. Its rebound did not coincide with returning risk appetite. Rather, the bellwether S&P 500[6] stock index is on course to finish the week little changed, unable to sustain a bounce after the third-largest drop in two years.
Recovery came courtesy of hawkish rhetoric in minutes from September’s FOMC meeting, as expected[7]. Officials flagged risks linked to leveraged loans and a stronger currency but still unanimously agreed that gradual tightening is the best path forward. A rise beyond the “long run” level was even posited.
That deflates the idea that the Greenback has migrated to the risk-on side of the G10 FX sentiment spectrum. Indeed, the benchmark unit reclaimed its place alongside the Yen and US Treasury bondsthe very next day, rising amid risk aversion.
Expectant markets will not have a meaningful opportunity to relitigate the issue until third-quarter US GDP data comes across the wires Friday. A slowdown is expected but the annualized growth rate is still seen coming in at a brisk 3.2 percent. A particularly big miss might revive “Powell put” hopes somewhat.
