US Dollar: Event-driven risks shape debasement narrative – MUFG
MUFG’s Derek Halpenny notes the US Dollar is broadly stable as investors focus on US Treasury actions to contain long-term yields and renewed talk of Dollar debasement.
The US Dollar remains broadly stable at the beginning of a new week, as investors focus on US Treasury actions to curb long-term yields and discuss the possibility of Dollar debasement, according to MUFG's Derek Halpenny. Key near-term drivers for Dollar sentiment include Scott Bessent's Economic D-Day plan for Iran and Fed Chair Jerome Powell's Jackson Hole speech, with risks leaning toward the downside.
While a repeat of the January selling (down 4% intra-day high-to-low) is not anticipated, there are concerns that sentiment could worsen further. The focus on Dollar debasement leaves investors uncertain if a severe action by the Federal Reserve would lead to a rebound in crude oil and an initial strengthening of the Dollar. However, given the emphasis on Dollar debasement, it is difficult to predict the Dollar's response to this event.
Fed Chair Jerome Powell is expected to provide insights on fiscal consolidation plans following the US Treasury bond buyback announcement last week, but analysts remain skeptical about substantial outcomes. If crude oil prices rise due to a severe economic sanctions plan on Iran, the 30-year yield may surpass the 5.34% high set last week.
Overall, US Dollar risks are predominantly tilted to the downside as investors await critical events this week.
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Also reported by 1 other outlet
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