ING strategist Francesco Pesole observes that recent equity sell-offs, driven by rising oil prices and AI-related concerns, have shifted investor preference toward the Japanese Yen (JPY) and Swiss Franc (CHF), challenging the US Dollar’s traditional safe-haven status.
Pesole notes that the 10-year Treasury yields fell below 5.0% for the first time in a month, while the 2-year SOFR swap rate dropped 15 basis points to 4.50%. This reflects reduced sensitivity to higher oil prices and a reassertion of the negative correlation between bonds and equities.
Despite these movements, the likelihood of a December Federal Reserve rate hike remains low, which should limit deeper USD losses. However, any stabilization in risk sentiment could help the Dollar regain some ground against the JPY and CHF.
The focus today is on the S&P Global PMIs, with expectations of a slight softening in US figures, though they are still expected to remain in expansionary territory.