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Scotiabank note that "the USD has weakened...>

DOLLAR
DOLLAR: Scotiabank note that "the USD has weakened broadly over the past several
sessions and losses are extending in response to President Trump's latest
comments on the Fed and his complaints about EU/China currency manipulation.
While short-term Fed tightening expectations have remained largely unchanged, US
Treasury yields have responded and softened to levels last seen in
mid/early-July, eroding the fundamental underpinnings that have driven the bulk
of the USD rally since mid-April. The USD's most recent upswing was not
supported by movements in interest rate differentials and driven primarily by
safe haven flows and positioning adjustments sparked by the panic in Turkey. A
continued unwinding of the panic trade should maintain pressure on the USD into
Friday's Jackson Hole speech from Fed Chairman Powell. Powell is not expected to
explicitly acknowledge President Trump's complaints but comments on flexibility
- as Powell moves to a higher-frequency policy meeting press conference schedule
in 2019 - will likely compound the USD's bearish turn as market participants
price in the risk of a more discretionary tightening path."
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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