Guarding against complacency in escalating Ukraine-Russia conflict – DBS

The Dollar Index (DXY) rose 0.7% to a high of 106.92 on geopolitical risks before better tech earnings fuelled a late US stock market rally and lowered the DXY to 106.65 overnight, DBS’ Senior FX Strategist Philip Wee notes.

Lacking direction on uncertainties

“The S&P 500 Index initially fell 1% but ended the overnight session unchanged at 5917. The US Treasury 2Y yield rose 3.4 bps to 4.31%, its highest level since November 12.”

“After the FOMC meeting on November 6, the futures market has reduced the odds of another 25 bps cut in December from 80% to almost 50%. The US Treasury 10Y yield has risen 70-80 bps to early July levels despite two rate cuts totalling 75 bps in September and November.”
“The Fed and other central banks are still looking to reduce monetary policy restrictions but have turned cautious on growth/inflation uncertainties over Trump’s policy pledges and heightened geopolitical risks.”