Dollar Fears Being Realised?
FX investors have generally embraced the stronger dollar theme in recent months while keeping a wary eye on rising US yields − after all if financial conditions tighten too much that could stop the dollar’s advance in its tracks. Now, not one, but two US economic reports have disappointed in quick succession. First, new home sales on Friday plunged m/m, and Monday’s durable goods orders came in soft too.
Could this be evidence that tighter financial conditions are already having a detrimental impact? Perhaps, but UBS economics is not overly concerned for now, and maintains the view that the Fed is likely to announce a start to QE3 tapering at the Sept 17-18 FOMC.
Read the full report: UBS