ING’s Francesco Pesole notes that the Dollar is benefiting as global bond yields and Oil prices rise, with the USD re-establishing a positive correlation with long-end US yields. He argues that only a marginal upside surprise in US CPI may be enough to fully price a September Fed hike, and sees DXY 100.0 increasingly as a realistic destination in coming weeks.
Rebuilding correlation with long-end yields
“The dollar is tentatively re-establishing a positive correlation with long-end yields, helped by a smaller-than-expected $6bn Treasury buyback announcement, which ultimately translated into an even smaller $5.19bn operation yesterday. US Treasury Secretary Scott Bessent’s reluctance to pick a fight with the bond market through oversized intervention remains a necessary condition for that positive USD-back-end rates correlation to regain its footing.”
“Pricing for next week’s FOMC…
