DXY Falls Through War and Hawkish Repricing
The US Dollar Index (DXY) fell to a low of just beneath 99.50, down 0.26%, after a session that saw it fail to rally on what are typically bullish inputs.
American forces struck Iranian launchers, crude oil prices rose by over 2%, and yields across the curve increased, but none of these factors were enough to push the DXY above its 200-day Exponential Moving Average (EMA), which it has been trading beneath since the session started.
The repricing that followed Friday's Jackson Hole keynote was not limited to the US market, with borrowing costs in the euro area and Japan reaching their highest levels in years. Japanese two-year paper touched a 31-year high, while German and French two-year yields went to their best since 2024, and longer-dated euro-area yields hit levels not seen in over fifteen years.
The Dollar cannot be paid a premium for a policy turn its counterparties are also being priced for. The European Central Bank meets September 9-10, a week ahead of the Federal Reserve's decision on September 16, with the ECB widely expected to raise rates and euro-area inflation data this week likely to firm that case rather than soften it.