US Dollar: Falling energy prices favour a weaker Dollar – MUFG

With Brent falling towards USD90, lower oil prices and declining US Treasury yields are relieving pressure on the Fed. MUFG’s Lee Hardman notes that the US Dollar has softened, taking the Dollar Index below Friday’s high. Attention now turns to the October US CPI report. Although futures continue to price in a December Fed rate rise, expectations for further increases in 2027 have been pared back.

Dollar weakens as yields fall

"The US dollar has continued to trade at weaker levels overnight after giving back all of its gains yesterday following the release of the stronger NFP report on Friday."

"The move lower in energy prices is also helping to bring down government borrowing costs."

"If there is further progress towards a US-Iran deal to end the conflict it would help to sustain lower energy prices and ease pressure on major central banks including the Fed to keep hiking rates."

"The main focus today will be the release of the latest US CPI report for October."

"The US rate market still expects the Fed to hike rates again as planned at the end of this year in December but has been scaling back expectations for further hikes in 2027."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)