Scotiabank analysts warn the US Dollar Index risks a bearish weekly close despite short-term risk aversion support.
The US Dollar (USD) strengthened broadly as risk aversion dominated markets, with equities lower and oil prices higher. The US Dollar Index (DXY) has stalled near 100.5 support after drifting from late June highs, but late-week trading threatens a bearish close unless a significant rally materializes.
Weak inflation data earlier in the week extended the DXY’s decline, though support at 100.5 held. Renewed concerns over the tech and semiconductor cycle, alongside escalating US-Iran tensions, fueled a classic risk-off shift, with Treasurys outperforming other core bonds.
Analysts argue that overnight index swap (OIS) pricing for a Federal Reserve rate hike by year-end remains overpriced, suggesting potential USD downside as markets reprice expectations.