US Dollar Index: Upside risks persist as yields climb – BBH

Brown Brothers Harriman’s Elias Haddad notes that the US Dollar is holding on to most of its weekly gains as US Treasury yields remain elevated. BBH sees near-term USD risks skewed to the upside, supported by US economic outperformance, hawkish Fed pricing and strong foreign demand for long-term US securities. Upcoming PMI releases will test whether the US growth advantage remains intact.

Dollar supported by yields and growth

"USD is clinging to most of this week’s advance, though performance is uneven."

"In our view, USD risk remains skewed to the upside in the near-term underpinned by: (i) US economic outperformance, (ii) the Fed's resolve to get inflation back to 2% anchoring hawkish rate pricing, and (iii) strong foreign demand for US long term securities."

"The July PMI readings for the major economies, due tomorrow, will test whether the US growth advantage remains intact."

"Today, second-tier US economic data is on deck: weekly jobless claims, June Chicago Fed activity index, and July Kansas City Fed manufacturing index."