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The ongoing erosion of US real yields, thanks to rising inflation expectations and stagnant US Treasuries, has proved to be a negative influence on US Dollar.
Weekly Fundamental US Dollar Forecast: Rise in US Treasury Yields May Not Help Greenback; April NFP Due
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Fundamental Forecast for the US Dollar: Neutral
The drop in the US Dollar has occurred even as US Treasury yields have stabilized (if not turned higher), suggesting that rising inflation expectations – not real US yields – are behind the move, which has historically been bad for the greenback.
The main economic event of the week will be the April US non-farm payrolls report due out on Friday, May 7.
According to the IG Client Sentiment Index, the US Dollar has a mixed bias heading into the first week of May.
Weekly Fundamental US Dollar Forecast: Mr. Powell Goes to Washington Advertisement
Fundamental Forecast for the US Dollar: Neutral
The main event of the week will be Fed Chair Jerome Powell heading to Capitol Hill for two days of testimony to deliver the semi-annual Monetary Policy Report.
But traders shouldn’t sleep on the US economic calendar. The upcoming January durable goods orders and PCE/Core PCE price indexes may further enflame inflation fears, sparking more gains by US yields.
The IG Client Sentiment Indexsuggests the US Dollar has a mixed bias heading into the last week of February.
US Dollar Lower as Inflation Expectations, Yields Rise