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May 15 - 12:55 PM
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SocGen: USD has Room to Rally N-Term as Rates Market about to Wake Up the Dollar
By eFXdata — May 15 - 11:30 AM
SocGen Research sees a scope for the USD rally in the near-term.
"The dollar was already rallying before the Presidential election and continued to do so until January 2025. From September 2025 until the outbreak of the war with Iran, 2-year Treasury yields stayed low, in a 3.4-3.7% range despite strong economic growth, an investment boom and signs of inflationary pressures at the margin. Over the same period, the Dollar Index meandered around in a 96-101 range, with EUR/USD trading between 1.14 and 1.21," SocGen notes.
"The war changed the interest rate outlook, with 2-year yields rising by over 6% since it started. The dollar has rallied, but only modestly compared to the rate moves we are seeing. That is because rates have risen elsewhere too, and while relative rates have moved in the dollar’s favour, they have only done so modestly. Even so, the trend (US 2-year yields rising faster than we are seeing elsewhere) is clear enough. The day between a Europe-wide holiday and the weekend isn’t a good time to make bold predictions about what will happen next, but the dollar has room to rally from here," SocGen adds.
Source:
Société Générale Research/Market Commentary