US Dollar stretches gains – Scotiabank

The US Dollar (USD) is extending gains this morning, pressuring the EUR below 1.08 and driving USDPY above 152 as US yields rebound from yesterday’s dip, leaving the 10Y yield within a whisker of 4.25%, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

USD is supported by rising yields

“The tightening US election race is boosting short-term sentiment support for the USD. A Trump win would bolster expectations of higher global tariffs and generous tax cuts which would lift inflation and boost growth and underpin firm or firmer yields in the US.”

“Longer term risks for the USD cold arise under this scenario, however, with isolationism fueling de-dollarization and large tax giveaways undermining already weak fiscal sustainability. Gold might continue to outperform as a hedge against these this range of risks in the meantime.”

“It’s another day full of central bank speaking engagements, including the ECB’s Lagarde, Lane and Knot. The Fed releases its Beige Book while Bowman and Barkin speak and both are FOMC voters this year. There is a 20Y Treasury auction (results at 13ET). After the close, Japan releases October PMI data at 20.30ET.”