Societie Generale Research discusses the USD outlook in light of UST buybacks and heading into Jackson Hole.

 

"It is hard to escape the fact that the second Trump Presidency is delivering a weaker dollar than US economic performance, or Fed policy, would suggest. That at least, is what the chart below suggests. On this basis, EUR/USD ‘should be’ around 1.12. However, that doesn’t alter the fact that relative growth revisions and relative interest rate trends, have been moving in the euro’s favour," SocGen notes.

 

"It isn’t the new Fed Chair who is holding down the dollar, but the Treasury secretary, by keeping the market cost of money cheaper than the economy warrants. Does that mean, say that the average level of EUR/USD since 2020 (1.12) is now a floor for EUR/USD. Leaving us in a 1.12-1.20 range with a fair value’ level around 1.16? For now, we are waiting to find out if the most recent US data releases are a harbinger of future weakness, or just noise," SocGen adds.