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MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
USD
The USD FX trend is still outperforming yield differential momentum. The chart below plots the DXY against the US-G3 2yr yield differential (unweighted). Compared to the last update of the chart, the wedge between the two series has grown a little wider.
- Note if we look at the equivalent chart on a swaps basis or in terms of relative monetary policy expectations for end year, the picture doesn't change a great deal, particularly in the context of EUR/USD.
- As we noted earlier in the week, other factors like relative terms of trade are continuing to move in the USDs favor (see this link for more details). Since this update the Citi terms of trade proxies have continued to trend against EUR and JPY relative to the USD.
- Still, we might expect yield differentials to play more of a dominant role in the near term, particularly given Powell's speech at Jackson Hole this evening.
Fig 1: USD DXY Index & US-G3 2yr Yield Differential (Unweighted)
Source: MNI/Market News/Bloomberg
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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