Forex
US Treasury's Signalling Tool Points to Softer Dollar
US Treasury Secretary Scott Bessent suggested that new fiscal consolidation plans are in the works, which could include cutting back on government spending. This move is seen as a signalling exercise to address higher long-term Treasury yields.
ING analysts believe this development points to a softer US Dollar in a risk-friendly environment. They expect high-beta commodity and emerging market currencies to outperform, while warning that a sharp sell-off in Treasuries and equities could revive safe-haven FX demand.
The DXY is seen as capped below 99.00, with support in the 98.65/70 region. ING analysts note that if the US Treasury's signalling tool is effective, it will likely lead to a gentler dollar decline.