Following a strong performance last week, the US dollar’s upward momentum was initially sustained against the majority of G10 currencies, although a slight wave of profit-taking later occurred. The extension occurred during the European morning, but there is potential for it to stall in North America. Multiple pairs are exhibiting options close to today’s peak levels, set to expire at 10:00 AM. The recent US announcement significantly increasing H-1B visa prices is a crucial topic.
The US tariffs increase the cost of importing goods, and now the administration is set to complicate the process of importing skilled labor. Meanwhile, Argentina’s situation persists, as it seeks a loan from the US in addition to the IMF support. The Bank of Japan has indicated plans to decrease its equity ETF holdings; however, the gradual pace of approximately 20 million per day does not pose a significant obstacle for Japanese stocks, which experienced a rally today. Most of the major exchanges in the region experienced this trend, with the exception of Hong Kong and the mainland stocks traded there, as well as India. The Stoxx 600 in Europe has declined approximately 0.2%, while US index futures are also experiencing a downward trend.
Benchmark 10-year yields are showing slight variations, and there has been minimal response to the news from the end of last week regarding Fitch’s upgrade of Italy’s rating to BBB+ with a stable outlook. The 10-year US Treasury yield remains relatively stable, just under 4.13%. Today, five officials from the Federal Reserve will be speaking, with three scheduled for noon ET. Gold achieved a new peak at approximately $3726 before stabilizing. November WTI is currently at $63 and has retraced to the pre-weekend low around $62.25. The Dollar Index begins today with a three-day increase, marking the longest stretch of gains since late July. The asset is experiencing a downward trend in a consolidative manner after encountering resistance near 97.85. The asset has identified preliminary support around 97.50 and may decline towards 97.20 without inflicting significant technical harm. An upward movement beyond 97.80 aims for the 98.25 region, and potentially 98.70.
Following the FOMC meeting and prior to the upcoming employment report, market sentiment could play a crucial role in determining the short-term performance of the U.S. dollar. The market appears to be largely indifferent to the national activities report released today by the Chicago Federal Reserve. Today, five Fed officials will address the public, presenting a range of differing perspectives. Tomorrow will present the preliminary September PMI and the Q2 current account figures. The PMI might present a headline risk; however, the market appears to respond more significantly to the ISM. Following a historic Q1 current account deficit of approximately $450 billion, the significant decrease in the Q2 trade deficit, which stands at about $190.4 billion compared to $381.5 billion in Q1, indicates a contraction in the Q1 current account deficit.
The TIC data indicated that foreign investors acquired a net $382 billion of US financial assets in Q2, following a slightly lower figure of nearly $385 billion in Q1. Foreign investors have increased their purchases of US stocks and bonds in the first half of 2025, surpassing the combined totals from the first halves of 2023 and 2024. BIS data and other research indicate that the pressure on the dollar is arising not from a capital strike but rather from hedging dollar exposure.