USD slips, US stocks and bonds underperform – Scotiabank

The US Dollar (USD)—and US assets generally—are under a little pressure into the end of the week. Indications from the White House yesterday are that a decision on a US attack on Iran will come within the next two weeks weighed on USD sentiment after reports had emerged Thursday that US officials were planning for a possible strike 'in the coming days', Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

USD edges lower as US bonds and equity futures soften

"Planning may well continue and President Trump appears to want to give diplomacy more time but the mixed messaging highlights the rather capricious and volatile nature of policymaking in this administration. There may be many elements to the calculus beyond diplomacy—oil prices, opposition on the right to foreign war involvement—but the imperative for action appears weaker now than just yesterday."

"The USD dipped broadly in quiet overnight trade while US equity futures are a little softer, in contrast to gains in European equities, while Treasurys are softer and underperforming on the day. Losses for the DXY, stock futures and Treasuries are relatively minor and may reflect thinner liquidity following yesterday’s US market holiday but broad softness in US assets without an obvious trigger is a little unusual."

"FX price action suggest the brief push higher in the USD yesterday through trend resistance that has dictated the slide in the index since January has been rejected. The broader decline may start to reassert itself after the short consolidation seen in the USD generally over the past week."