There is no reprieve for the greenback on Tuesday as all the major factors point to further waning of its attractiveness. The US currency struggles to regain strength after the recent change in the Fed’s tone on tightening prospects. Recent investor optimism over the US-China trade negotiations added to the bearishness as well.
Today, the PBOC has strengthened the yuan by the most since June 2017, which put the USD under further pressure. Also, we see a strong recovery in the European currencies as euro rises on hopes that Italy’s government will make enough budget concessions to satisfy the European Commission. Meanwhile, the cable jumped as the EU court aide hinted at leaving open option to revoke Article 50 unilaterally. Strong UK PMI construction and euro zone PPI data also help to lift sentiment surrounding the European currencies and add to the selling pressure on the buck.
A more notable bearish driver for the dollar is further fall in Treasury yields. The 10-year yields broke below the 3.00% figure, down to three-month lows. Even more alarming is the fact that the spread between the 3-year note and the 5-year note have inverted for the first time since 2007, which is a sign of a recession in the US. This factor should be closely followed down the road as further bearish signals from this front could derail Fed’s tightening plan and make the greenback break the ongoing bullish trend.