By Konstantinos Chrysikos, Head of Customer Relationship Management at Kudotrade
The dollar index hovered near 99.6 on Monday, stabilizing as optimism grew that a deal could end the US government shutdown. As a result, the dollar found some support from a rise in Treasury yields across maturities, with the 10-year note moving close to 4.14%. New hopes could fuel risk appetite and drive investors away from treasuries. Senate Majority Leader John Thune said over the weekend that a bipartisan budget framework is taking shape, potentially reopening the government through January.
However, the dollar could remain under pressure after weak consumer sentiment data. Friday’s University of Michigan survey showed confidence plunging to 50.3, as households expressed concern about personal finances and the prolonged government shutdown. The results reinforced worries that consumer caution could slow spending and weigh on overall growth.
Attention this week will turn to remarks from several Fed officials, which could provide new clues on how the central bank is balancing softening consumer confidence with a fragile labor market. Dovish remarks could weigh on both the dollar and yields. Markets assign roughly a 65% probability of a December rate cut.