Dollar Decline Intensifies

Today’s market analysis on behalf of Mazen Salhab Chief Market Strategist MENA in BDSwiss

The US dollar continued to decline due to fears of a potential recession in the United States, causing significant market volatility. Investors are moving from risk assets to safer options like bonds, changing market expectations about the dollar and interest rates.

The market has started pricing in additional rate cuts, anticipating two 50 basis points cuts and another 25 basis points cut this year. The dollar’s decline was triggered by disappointing US labor data released last week, which sparked fears that the central bank could have to cut rates more aggressively. High-yielding currencies dropped, while safe-haven currencies such as the Swiss franc and the yen gained.

US Treasury yields also came under pressure as the market expects the Fed to cut interest rates deeper. Yields could remain under pressure and could see more volatility as traders reassess their expectations in the coming days. In this regard, PMI data could strongly affect the market.

The ISM Services PMI is expected to rise to 51 points in July from June’s 48.8 points. Better-than-expected PMI numbers could ease the recent dollar sell-off and provide some support to falling Treasury yields in the near term.