Brown Brothers Harriman’s (BBH) Elias Haddad notes that the Treasury’s buyback announcement initially pushed longer-term Treasuries lower, weakened the Dollar and boosted Gold.
He argues the USD slump should stabilize this week, with the US growth advantage offsetting fiscal concerns
Futures imply modest further Fed tightening, but BBH sees risks skewed toward a dovish repricing as inflation and labor data remain contained. USD slump expected to stabilize “The Treasury’s buyback announcement dominated market action last week. Longer term Treasury yields initially fell but the relief proved fleeting, USD weakened against all major currencies and gold rallied.
The Treasury’s intervention blurred the lines between improving market functioning and suppressing borrowing costs to contain fiscal stress.” “Regardless, we expect the USD slump to stabilize this week. The widening US growth edge over other major economies, reflected by the composite PMIs, can offset some of the structural drag to USD from worsening US fiscal credibility.” “ADP private employment change for the week ending August 8 will be of interest (Tuesday). While the weekly ADP is poor at predicting monthly NFP change, it does a better job at capturing the broad direction of travel.