⚖️🔻 Dollar Catches Down to Interest Rate Spreads: Cable FX Macro

• Last week, we noted the dollar outperformance detaching from a sharp fall in rate spreads. Of course, the safe haven flow supported the greenback, however, rate spreads did not recover, and we started flagging this development as a potential cap to further gains

• We have now seen an unwind of the dollar strength as it catches down to rate spreads. This is not to say that interest rate spreads always lead the dollar, but the wide disconnection raised my attention

• The chart below shows our own dollar and interest rates spreads measures, <.RDDXY> Cable FX Macro Dollar Index, <.RDDXYIR> Cable FX Macro Dollar Spread Index