Bessent's Intervention Fuels Carry Trades Amid Benign Risk Environment

US Treasury Secretary Scott Bessent's recent intervention in the US Treasury market has led to lower long-end yields, decreasing interest volatility and contributing to lower FX and equities volatility.

Lower oil prices, down around 8% since last week, are also supporting carry trades. The Australian dollar got a boost when July CPI surprised on the upside, increasing the chances of a Reserve Bank of Australia rate hike in November.

The benign risk environment is expected to keep the US Dollar relatively steady, but a benign US core PCE print at 0.2% month-on-month could see some mild dollar losses.