The US dollar is currently at a 10-month high against major currencies, supported by surging US bond yields. Strong economic data, hawkish Federal Reserve rhetoric, and an upcoming budget deficit have pushed the 10-year Treasury yield over 4.5% for the first time since 2007. This has led to a 0.5% drop in the euro, its worst quarterly loss in a year, and a six-month low for the pound. The US dollar index hit its highest level since November and is expected to reach 107.20. Other central banks, such as the Swiss National Bank and the Bank of Japan, are also signaling the end of their hiking cycles, further contributing to the strength of the US dollar.
Meanwhile, commodity prices have provided some support to currencies such as the Australian and New Zealand dollars, which have remained relatively stable. However, China’s yuan is close to the weak end of its trading band due to fixed midpoint rates. Despite potential weakening in US consumer confidence and home sales data, the dollar is expected to find support due to concerns over weak global growth and haven demand. The long-term forecast for the euro/dollar exchange rate is $1.06, but downside risks are anticipated if the Federal Reserve considers rate cuts.
In summary, the US dollar is currently at a 10-month high against major currencies due to strong US bond yields and resilient economic data. The euro and pound have experienced significant losses, while antipodean currencies have remained relatively stable. The Swiss franc and yen have also weakened, signaling a potential end to their hiking cycles. Despite potential weakening in US data, the dollar is expected to find support due to concerns over global growth, leading to haven demand.