USD continued to dominate the FX markets. The greenback has been benefit from aggravated stress points in other currencies. Whether is trade tensions, sanctions, Brexit concerns, European politics, exposure to oil prices or interest rates etc, the USD look to be the safe haven of choice. Even within the US-China trade battle markets are biased towards a positive US outcome. While domestically, the US continues to provide investors reasons to be satisfied with the USD outlook. Fridays US labor report was solid with unemployment fell to 3.9% and wages growth rose 2.7%. US 10- year yields jumped towards 3% providing yields seekers a meaningful spread within the G10 (although sharp retracements was seen today). Elsewhere US data has reported as expected with embeds further economic accelerations. In addition, July manufacturing employment indicated no negative effect from the USA protectionist activities. While the Fed continued to reiterate its message of gradual rate increase there is a growing case for a more aggressive hiking cycle. Especially considering that sizable upwards adjustment in personal income should support higher consumption. Jamie Dimon JPMorgan Chase & Co CEO over the weekend suggested that US 10-year bond yields could reach 5%. We continues to remain optimistic on the short-term USD outlook as other G10 currencies struggle with idiosyncratic issues. Our most negative view is on the cable as Brexit outlook remains extremely clouded. It’s hard to image after last week’s Carney comments that the BoE would tighten aggressively with risk surrounding Brexit mounting.
By Peter Rosenstreich
