USD strengthens modestly – Scotiabank

The US Dollar (USD) is trading a little higher overall this morning, partially reversing three days of losses following the tariff turmoil at the start of the week, Scotiabank's Chief FX Strategist Shaun Osborne notes.  

USD trades mostly firmer in quiet trade

"Markets appear in constructive mood generally, with global stocks are trading in the green for the most part. The FTSE outperformed in anticipation of lower rates at today’s BoE policy decision—which also helps explain the GBP’s overall underperformance on the session. The JPY is resisting the USD’s advance to trade more or less flat on the day." 

"BoJ Governor Tamura suggested that the policy rate would need to rise to at least 1% by early 2026— which largely reflects market pricing. USD gains reflect moderately higher yields relative it its major peers on the session so far. Treasury Sec. Bessent said the Trump administration was focused on taming long-term rates, however, suggesting that the president will not be trying to jawbone the Fed into cutting the policy rate." 

"There is a little more data to work through this morning and markets may be slowly re-acquainting themselves with macro developments ahead of tomorrow’s NFP data as headline risks subside. The Banxico policy decision at 14ET is expected to result in a 50bps cut, taking the policy rate to 9.50% and the premium over the Fed funds target rate down to 500bps. Markets may be sensitive to guidance as the rate cushion for the MXN is thinning."