Dollar gets haven bid as China talks tough on Taiwan – BBH
02.08.2022, 12:24

Dollar gets haven bid as China talks tough on Taiwan – BBH

According to Win Thin, Global Head of Currency Strategy at BBH, the US dollar draws some support from haven flows on Tuesday amid mounting diplomatic tensions in the wake of the planned Taiwan visit by US House Speaker Nancy Pelosi. He further sticks to his medium-term USD bullish outlook ahead of Fed speakers and important US macro data this week.

Key Quotes:

“The dollar is getting some limited traction as risk off sentiment takes hold.  DXY is up for the first time after four straight down days and trading near 105.541 as House Speaker Pelosi’s  Taiwan visit has led to tensions with China. We maintain our strong dollar call and believe that markets are misreading the Fed’s commitment to lowering inflation. However, the greenback is unlikely to get much traction in the absence of strong economic data.  This week’s U.S. data will be key for the medium-term dollar outlook.”

“Fed speakers will be closely scrutinized this week. We do not think Fed officials are very happy with the market’s dovish take on its decision last week and they are likely to push back this week.  As such, prepare for comments that tilt decidedly hawkish.  Evans, Mester, and Bullard speak today.  Harker, Barkin, and Kashkari speak tomorrow.  Mester speaks again Thursday and Barkin speaks again Friday.”

“Over the weekend, uber-dove Kashkari reiterated that the Fed is focused on lower inflation, noting that “We are committed to bringing inflation down and we’re going to do what we need to do.  We are a long way away from achieving an economy that is back at 2% inflation, and that’s where we need to get to.”  We concur.”

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