Brown Brothers Harriman’s Elias Haddad notes that recent political comments briefly steadied risk sentiment, but renewed risk aversion has lifted the Dollar, Oil and bond yields while pressuring equities. With no key data due, focus is on Fed speakers. BBH argues that rate differentials keep DXY in a 96.00–100.00 range, but energy-shock-related stress skews USD risks higher.

Rate spreads keep Dollar rangebound

“Market sentiment steadied briefly overnight after Israeli’s Prime Minister Benjamin Netanyahu said the war will end sooner than people think and energy infrastructure will no longer be targeted. However, the short-lived calm gave way to a fresh bout of risk aversion. Crude oil prices are back up, equity markets are under renewed downside pressure, bond yields are pushing higher again, and USD is firmer.”

“As a result, interest rate expectations adjusted higher. US rate cut bets over the next twelve months has been priced out, while in most other advanced economies additional rate hikes have been priced in.”

“Bottom line: rate differentials between the US and other major economies still anchors DXY within a 96.00-100.00 range. But until we reach peak fear around the energy shock, USD risks remain skewed to the upside driven by dollar funding needs in periods of financial market stress.”

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