The US dollar has ticked higher in the past hour as Treasury yields have fallen from the highs of the day. It’s been a mostly lacklustre day for equities and the S&P 500 is on track for a 0.3% decline.
Treasury yields rose earlier after sales for 2s and 5s with the latter one the soft side and pushing yields to the daily extremes. There was also some concession for supply before the sales. The Fed funds futures market is now pricing in just 78 bps of cuts. When you factor in tail risks, that suggests real market pricing for cuts is now below the 75 bps in the dot plot.
Looking ahead, economic data will continue to drive the market but it’s not until the PCE report on Thursday that we get top-tier data. Tomorrow we do get some second-tier numbers with durable goods orders and consumer confidence from The Conference Board.
The big test will be next week with the ISM data and non-farm payrolls. Further strength would add to USD strength while a turn lower would reverse recent gains.
USDJPY 1 hour chart