The chatter is that it isn't, via Bloomberg
Here are a few further thoughts on the recent USD strength and why it may continue this week. Firstly, quarter end rebalancing flows are expected to continue to strengthen the USD. There is also a conference on Wednesday titled 'the ECB and its watchers' and this may work as a catalyst for USD strength. In particular focus for today however is the US presidential debate.
US Presidential debate
Biden is winning in the national polls at the moment and if the debate goes well for Biden then the centre of gravity could shift to solid expectations of a Democrat win and a major stimulus package in the New Year. This would likely see yields rise and be a USD boost. However, a tighter debate where Biden slips back in the polls could heighten investor concern and encourage volatility. If the USD is acting as a safe haven then there is a case for USD strength regardless in the next couple of days.
Finally, virus cases are continuing to rise in Europe. However, deaths are not spiking higher in the same way that they were in the first wave. So, the PMI data out this week will be important. If we see another dip in PMI's then we can expect EUR selling to further support the DXY higher.
A related question is whether or not the USD is acting as a safe haven again (as it did in the heart of the COVID-19 initial crisis) or is this current strength just a reduction in over heavy USD short positions? It's a good question. My take for what it's worth is that it is still retaining some of its safe haven appeal. So, whichever way I look at it the risks seems skewed for more USD upside this week.
Yesterday saw the USD take a back seat as equities lifted higher across the board. So, if equities keep rising then the playbook looks set for further USD falls.
What do you think?
