USD: Safe-haven demand and Fed easing bets – TD Securities

TD Securities’ Global Strategy Team expects the US Dollar to benefit from safe-haven flows as markets react to the Iranian conflict. They anticipate that geopolitical risks will drive expectations for more Fed easing and note broad but measured Dollar buying in early trading.

Safe-haven flows and policy expectations support Dollar

"Initial market reactions have shown market patience in general. We have seen broad-but-measured USD buying, gold up around $150, 10y Treasury yields about 2bps higher, and Brent hitting a high of $82bbl and currently trading down to around $78."

"The USD's safe haven status will be on full display. CHF is the only currency to outperform the USD. NOK and CAD should outperform EUR and AUD, especially with crowded positioning. USDCAD likely moves higher on the onset, with CAD to outperform AUD, EUR, SEK and GBP."

"Greenback strength notwithstanding, gold could surge as much as $200/oz on the open, with silver likely to rally, as well."

"We expect TIPS BEs to widen and Treasuries to bull steepen, with 10s likely to rally. There will be time to assess inflationary impacts on the US later, but the immediate knee-jerk will be driven by expectations for more Fed easing."

"In the upcoming week, focus will be on the NFP report on Friday, where we expect an unchanged UE of 4.3% and +90k payrolls for February. In addition to the labor market data, we will get Retail Sales, as well as ISM manufacturing and services. "

"President Trump's soft deadline of 10-15 days for Iran to make a deal will also settle in the upcoming week, so markets will be closely watching for any signs of a US strike."

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