A rare streak of USD wins. The dollar chalked up another week of by-now routine gains alongside the continued bear steepening in USTs (10Y real yield +20bp, 2s10s another 20bp steeper w/w), headlined by notable intra-week big figure breaches in EUR/USD (1.05) and GBP/USD (1.22). DXY was up 10 out of the past 11 weeks since the fateful post-US CPI slump in mid-July (as of end of September), a rare feat of consistency seen only a handful of times in the past 25 years. The late-week reversal notwithstanding — perhaps an artefact of noisy month-end/quarter-end rebalancing and/or exporter hedging flows — the good news for USD bulls is that such orderly, low vol dollar rallies tend not to collapse under their own weight: Figure 3 shows that the median tendency for the greenback in such situations is to keep appreciating at a steady, if somewhat less frenetic pace over the following 6-months; additional 4%-5% gains over this period is the norm, not the exception.
- J.P. Morgan Strategy
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