USD: Relief-driven downside potential – BBH

Brown Brothers Harriman’s (BBH) Elias Haddad notes that the US-Iran ceasefire has pushed financial markets into relief mode, with Brent, equities and bonds reacting positively and the Dollar falling sharply. He argues that, as long as ceasefire talks hold, the Dollar can move lower toward levels implied by US-G6 rate differentials, while attention turns to the March FOMC minutes for guidance on future Fed policy.

Dollar weakens as risk sentiment improves

"Financial markets are leaning hard into relief mode. Brent crude oil prices slumped by roughly 16% while global equities and bonds are up sharply. USD plunged across the board with pro-cyclical currencies outperforming."

"Provided the ceasefire talks don’t break down, USD has room to adjust lower in line with the level implied by US-G6 rate differentials."

"The FOMC March 17-18 meeting minutes take the spotlight today (7:00pm London, 2:00pm New York). The minutes will shed more light on how high or low the hurdle is for a rate hike."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)