Steadier sentiment across risk assets prevails this morning, allowing gains in global stocks and a broader rebound in the US Dollar (USD) after a few days of mild losses, Scotiabank’s Chief FX Strategist Shaun Osborne notes.
USD steadies after correction
“USD gains look quite solid and the DXY is attempting to break out of the recent consolidation pattern on the short-term chart. The DXY’s drift lower since late last week took the form of a bull flag pattern and a sustained push through 106.60/65—right about where the index is this morning—could trigger another leg up.”
“Rising US yields and still resilient growth prosects plus expectations of dollar-positive policies form the incoming administration are refreshing ‘US exceptionalism’ argument in favour of the USD. Beyond FX, risk assets may warrant some attention. Reuters noted yesterday that ‘the S&P 500 is having one of its best calendar years since 1928’. Auspicious. November returns of 3.8% (so far) for the S&P 500 are well ahead of the average of the past 35 years (2.3%). Investor sentiment is strongly bullish but market breadth is softening.”
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