20 Mar 2015
USD to consolidate till rates backdrop becomes positive for the dollar – BBH
FXStreet (Barcelona) - The Brown Brothers Harriman Team comment on the odd behaviour seen post the FOMC between the dollar and US rates.
Key Quotes
“What's interesting to us is that the dollar and the US rates markets have behaved differently since the sharp moves on Wednesday.”
“The dollar has basically recouped all of its post-FOMC losses from Wednesday against the euro, sterling, and most other currencies. Yet the 10-year UST yield has risen only 7 bp vs. -13 bp Wednesday, and remains below 2.0%.”
“A similar dynamic has been seen in the Fed Funds futures strip, with most yields only up around 5 bp after dropping -15 to -20 bp Wednesday.”
“Can the dollar rally resume in earnest without further support from the interest rate markets? We believe the dollar rally remains intact, but we could see a period of consolidation until the interest rate backdrop becomes more positive for the dollar.”
Key Quotes
“What's interesting to us is that the dollar and the US rates markets have behaved differently since the sharp moves on Wednesday.”
“The dollar has basically recouped all of its post-FOMC losses from Wednesday against the euro, sterling, and most other currencies. Yet the 10-year UST yield has risen only 7 bp vs. -13 bp Wednesday, and remains below 2.0%.”
“A similar dynamic has been seen in the Fed Funds futures strip, with most yields only up around 5 bp after dropping -15 to -20 bp Wednesday.”
“Can the dollar rally resume in earnest without further support from the interest rate markets? We believe the dollar rally remains intact, but we could see a period of consolidation until the interest rate backdrop becomes more positive for the dollar.”