US Dollar: Pressure builds as risk premia rise – ABN AMRO

ABN AMRO's Georgette Boele observes that the US dollar is facing increasing pressure as fiscal concerns and rising risk premia outweigh the benefits from higher US Treasury yields. Despite the recent buyback program by the Treasury, investors remain concerned about US debt dynamics and fiscal risks. The US dollar experienced a decline even before the announcement, and after the yield drop, it faced further pressure across the board.

The euro has gained from this weakening dollar and is expected to continue doing so if the dollar continues to fall. In this scenario, the risk premium appears to be a more influential factor than nominal yields in determining the US dollar's value. Since the beginning of July, the US term premium has been on an upward trend while the US dollar has been declining.

On Wednesday, GBP/USD reversed its bullish attempt and broke below 1.3600, while EUR/USD accelerated its losses and reached multi-day troughs near 1.1650. Gold is facing renewed downside pressure and is challenging the $4,600 level per troy ounce. Bitcoin is trading above $78,000 but struggling to surpass the $80,000 mark, with institutional demand increasing.

The main event for markets this week occurs after US markets close, with Nvidia set to report strong results for the last quarter. Federal Reserve Chair Kevin Warsh is scheduled to give his first Jackson Hole speech on Friday, generating interest in the potential interest rate decision for September.