ING: The USD - FJElite

A week after US Treasury Secretary Scott Bessent's intervention in the US Treasury market, longer-dated yields are some 10-15bp lower. In defending that intervention last week, Bessent claimed that, as Treasury Secretary, he has 'asymmetric information’- i.e. more information than the market. Whether such information includes the path to de-escalation talks in the Middle East remains to be seen, but it is clear that an 8% swing lower in oil prices since last week has helped. Here, Pakistani-brokered peace talks seem to be grabbing the market's attention. The next test for the long-end comes from today's release of US PCE inflation data, tomorrow's $44bn 7-year note auction and then Friday's Jackson Hole speech from Fed Chair Kevin Warsh.

Lower yields have seen interest volatility dip again and feed into lower volatility in FX and equities. Carry remains king and, overnight, one of the popular carry trade targets in the G10 space - the Australian dollar - got a boost when July CPI surprised on the upside. This has increased the chances of a Reserve Bank of Australia rate hike in November.

Back to the dollar. A benign US core PCE print at 0.2% month-on-month should keep the dollar relatively steady today, though the benign risk environment could see some mild dollar losses. 99.00/10 may well cap the topside for DXY and we favour a drift back to the recent lows at 98.60.