Dollar is nervous. Forecast as of 20.05.2022
Weekly US dollar fundamental forecast
They wanted the best, and you know the rest. Fed ignores the problems in the stock market, and investors are attracted by safe havens, sending down Treasury yields along with the US dollar. Differently put, the financial conditions in the USA are somehow eased, contrary to the Fed’s willingness to tighten them and cool down domestic demand. In addition to the ECB’s hawkish stance, the above circumstances supported the euro, and the USD failed to finish the seventh week in a row with a gain.
Just as the Fed monitors financial conditions, the ECB follows the spread between European bond yields. Although it is still far from its highs of 2018 and 2020, the spread between Italian and German bond yields has widened by 65 basis points since the beginning of the year.
Dynamics of Italy-Germany yield spread
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