Dollar Rises, Traders Buy Long-Term Bearish Options
The dollar strengthened after most G-10 currencies after historically low consumer sentiment data. The greenback is still headed for a second weekly advance.
The Bloomberg Dollar Spot Index rose 0.2%; spot volumes run at 70% of recent averages, a Europe-based trader says
The dollar gauge showed little reaction to the University of Michigan’s consumer sentiment index falling to the second-lowest level on record due to high inflation expectations
US Consumer Sentiment Falls Close to Record Low on Inflation
President Donald Trump said he expects to set tariff rates for other countries in the next few weeks
“We’re cautiously optimistic when it comes to India, South Korea, Japan, Canada, and Mexico, for example,” wrote Macquarie strategists Thierry Wizman and Gareth Berry, who expect deals to lower the average tariff rate. “But we also believe that (1) overall policy uncertainty in the US will not decline to ‘normal’ levels soon, and (2) temporary shocks can have long-lasting effects on perceptions and the need to ‘diversify’ risks, especially when set against very high exposures to US assets and the USD among global allocators”
Real money names seen buying long-dated bearish exposure versus the euro, while leveraged desks go long the yen in the spot market: trader
Bank of Atlanta Fed President Raphael Bostic said he expects the US economy to slow this year but not fall into recession, and reiterated that he sees one interest-rate cut in 2025
EUR/USD fell 0.2% to 1.1162, reversing an earlier 0.3% advance; ECB Governing Council member Martins Kazaks said cuts in euro-zone borrowing costs are nearing their end-point if the base case for inflation returning to 2% this year materializes
Euro down a fourth week for the first time since Jan. 10
GBP/USD fell 0.3% to 1.3267
USD/JPY rose 0.2% to 145.94; fast money funds have added to existing short positions as bearish conviction builds after Japan GDP data showed a higher-than-expected deflator, according to Asia-based FX traders
“The lack of progress with US-Japan trade negotiations is prolonging concerns about Japanese government finances, contributing to JPY and JGB weakness,” wrote Bank of America strategists Athanasios Vamvakidis and Claudio Piron. “We continue to think that structural factors will drive more selling than buying of JPY, as recent balance of payments data confirm”
NZD/USD little changed, leading G-10; New Zealand’s 2-year inflation expectation rose to 2.29% in 2Q from 2.06% in 1Q, according to the Reserve Bank of New Zealand
USD/CAD rose 0.1% to 1.3972
Source : Bloomberg
