The US Dollar (USD) is strengthening against major currencies, with the Euro (EUR) underperforming as French and Italian bonds drive a global bond sell-off. Elias Haddad from Brown Brothers Harriman (BBH) highlights that persistently high energy prices are skewing risks for inflation, policy rates, and bond yields higher, which supports the USD and currencies of energy exporters over those of energy importers.
Haddad notes that the USD is up against all major currencies, with the EUR lagging due to the renewed sell-off in global bonds. The upcoming September 15-16 FOMC meeting minutes are expected to look somewhat dated after recent calls for patience from key Federal Reserve officials, including Williams, Jefferson, and Bowman.
The September FOMC hike had a clear hawkish tilt and unanimous backing, which could influence current market dynamics. High energy costs are keeping risks to inflation, policy rates, and benchmark bond yields skewed to the upside, favoring energy exporters' currencies and the USD. Additionally, US growth outperformance and strong foreign demand for US securities are providing an added boost to the USD.