US Dollar: Soft despite supportive fundamentals – ING
ING’s Chris Turner notes the Dollar has been unexpectedly soft despite higher energy prices and firm short-dated US rates ahead of the US August CPI and a likely 25bp Fed hike.
The US dollar has been unexpectedly subdued despite higher energy prices, firm short-dated US interest rates, and expectations of a 25 basis point Federal Reserve hike ahead of the August CPI release. Chris Turner of ING attributes the dollar's weakness to strong equities and a fragile USD/JPY pair. The investment environment, with global equities near their peaks due to the AI investment boom, and the fragile USD/JPY, which may be influenced by Japanese policymakers fulfilling a grand bargain with Washington, are key factors in the dollar's malaise.
The bond market will be closely watched as the US Treasury begins buying back longer-dated Treasuries and auctioning $39bn and $22bn of 10 and 30-year bonds. Despite higher energy prices, the Dollar has not shown a strong reaction and may break support at 98.55/65, with USD/JPY potentially driving a drop to 98.00. Traders are awaiting US inflation figures for further encouragement, while USD/JPY remains under bearish pressure, nearing a seven-month low.
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