USD Cautiously Rebounds as Markets Eye Event Risk
Market sentiment has shifted cautiously as the week begins, with equities in defensive mode and Treasuries holding firm. This cautious tone is reflected in a modestly stronger US Dollar (USD), according to Scotiabank strategists Shaun Osborne and Eric Theoret. They note that event risk from sanctions on Iran, US Personal Consumption Expenditures (PCE) Price Index data, and Fed Chair Warsh's Jackson Hole speech could drive moderate USD gains as investors pare back positioning.
Despite the potential for short-term gains, the broader dollar trend remains negative. Technical trends remain bearish, and while oscillator signals show some moderation in the dollar decline, no reversal is evident at this point. The US Dollar Index (DXY) may experience limited near-term gains, potentially capped near 100.
The calendar for the week ahead is significant, with several events that could impact market sentiment. However, it remains to be seen whether these developments will change the dollar's fundamental trajectory overall. Osborne and Theoret emphasize that positioning is being pared back, which could lead to moderate USD gains in the short run.