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Strong US Dollar to prevent Treasuries exodus

September 22, 2014

Last week, the FOMC clearly stated that the US monetary policy can be expected to return to normality. For the end of 2015, US Fed officials even raised their median projection for the Fed Funds Rate by almost a quarter to 1.375%, indicating a somewhat steeper path of rate hikes. Hence, the expectation of higher US government yields has provided further support to the US Dollar, sending the currency to multi-year highs.

As a result over recent months, US Treasuries have been outperforming other sovereign paper for investors in many other, non-USD (-related) currency regimes. This week, the focus might well shift away from geopolitics to economic data again, given the full release calendar. In the US, PMIs, durable goods orders and multiple housing data are to be released, while Europe will be looking at major PMIs and the German IFO survey results.

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