US Dollar: Gains Extend as Attention Turns to PPI – BBH

The Dollar’s broad-based advance has reached a 19‑month high, with rising expectations of Fed funds rate hikes driving Treasury yields upwards, according to Elias Haddad of Brown Brothers Harriman (BBH). In his assessment, resilient US growth, a strong labour market and persistent inflation maintain the upward bias for the USD. October PPI data could strengthen expectations of Fed rate hikes and lend further support to the Dollar.

Is Fed repricing driving the Dollar’s strength?

"USD extends this week’s broad gains to a fresh 19-month high as the sharp upward adjustment to Fed funds rate hike expectations lift Treasury yields."

"The USD rally may look stretched in the near-term, but robust US growth, favorable labor market conditions and sticky underlying inflation keep the bias tilted higher."

"The US October PPI is up next (1:30pm London, 8:30am New York). Focus will be on the PPI components that feed into core PCE, particularly Airline Passenger Services and PPI Services less Trade, Transportation, and Warehousing. A hot PPI print reinforcing October’s strong CPI reading could further bolster Fed rate hike bets and underpin USD."

"One fewer scheduled rate decision could amplify market moves around meetings and increase sensitivity to data between them."

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