Back to Blog
Dollar index market watch7/5/2023 ![]() ![]() ![]() stock indexesįinished modestly lower as fed funds futures traders priced in an 79% chance of the Fed holding interest rates steady in June and a 21% chance of another quarter-point hike next month. It remains to be seen whether high-quality corporate bonds would be considered a good alternative to Treasurys, which would help keep credit spreads contained. European rate markets should outperform along with the other G-10 rate markets, according to Nakamura. Partially offset by traders also theoretically pricing in more aggressive rate cuts by the Fed. Investors and traders would add risk premium and send rates higher on T-bills and the 2-year note Other currencies - whether it’s the euro or the Swiss franc - or even commodities such as gold “are likely to benefit pretty significantly.” Meanwhile, it would be a “mixed picture” for the Treasury market, he said. does default on its debt, the immediate reaction in financial markets would be “dollar-negative,” Nakamura of AGF Investments said via phone. in Chicago, said her firm still thinks the dollar will remain the most dominant currency, “but that’s assuming Congress passes a debt-ceiling increase.” The continuing uncertainty “puts pressure on our dollar that’s already being weighed down by other countries which are starting to get away from dollar dominance,” such as Russia and China. Lauren Henderson, an economist at Stifel, Nicolaus & Co. Republicans want spending cuts in exchange for raising the ceiling on federal borrowing, while Biden and other Democrats are against that and favor a “clean” debt-limit increase. The main bone of contention between Republicans and Democrats is whether spending cuts should be attached to any agreement. Treasury is likely to run out of ways to operate under the $31.4 trillion statutory borrowing limit, as soon as June 1. and global economies, Reuters said, citing two sources familiar with the matter. default on its debt would have on the U.S. ![]() Meanwhile, Yellen is calling chief executives personally to explain the “catastrophic” impact a U.S. However, analysts don’t expect a deal yet. debt ceiling with the country’s four top lawmakers, around 4 p.m. President Joe Biden was set to host a much-anticipated meeting on the U.S. “Yellen is correct about the possible ramifications to the dollar, and even bringing negotiations down to the wire would marginally erode confidence in the U.S.” Heightening the concern that’s unfolding behind the scenes in financial markets is the seeming lack of progress in Washington. and worry about its credibility and its reserve status,” said Tom Nakamura, a currency strategist and co-head of fixed income at AGF Investments in Toronto, which managed $31.6 billion (CAD $42.3 billion) as of April 30. “Each successive episode of debt-ceiling drama adds reasons for investors and officials from around the world to look at the U.S. ![]() debt-ceiling debate continues “to fuel anxiety among traders,” said Daniel Takieddine, the Dubai-based head of the Middle East/North Africa region for global financial services company BDSwiss. Volatility in currencies could grow with inflation data due and as the U.S. So far, anxiety over the debt ceiling has been largely contained to the short-term Treasury bill market, but that could change. stock and bond markets, as traders and investors await Wednesday’s consumer price inflation update for April. Read: Big question with dollar under fire from rival countries and currencies: What happens to markets if the greenback loses its dominance? As of Tuesday, the round-the-clock foreign-exchange market remained relatively calm, along with U.S. debt would have an “adverse impact” on the dollar’s role as a reserve currency, a scenario that’s been much speculated upon and many have pushed back against. Now, Treasury Secretary Janet Yellen is warning that a default on U.S. ![]()
0 Comments
Read More
Leave a Reply. |