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USD, Treasuries and US equity futures weaken - Scotiabank

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USD, Treasuries and US equity futures weaken - Scotiabank

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New update 2025.05.21 20:55
USD, Treasuries and US equity futures weaken - Scotiabank

update 2025.05.21 20:55

The US Dollar (USD) is trading weaker on the session. It's another one of those uncomfortable 'sell everything' days for the US. The USD is down while Treasurys are selling off, pushing 10Y yields over 4.5% amid worries about the impact of the (currently stalled) tax-cut bill on US debt and deficits, Scotiabank's Chief FX Strategist Shaun Osborne notes.

USD slides as Treasuries weaken and equity sentiment softens

"Higher rates are clearly unhelpful for US growth prospects. Equities are softer in Europe and US equity futures are lower. Higher yields and concerns about reports that Israel is considering a strike in Iran's nuclear facilities are weighing on risk appetite. Crude is up around 1% and gold is firmer. The SEK and NOK are outperforming while the ZAR and MXN are underperforming on the day. Broader USD sentiment looks fragile again. G7 Finance Ministers and central bankers are currently meeting in Canada. A wide range of issues are up for discussion but trade and tariffs will be front and center for officials."

"FX may feature in bilateral talks (US/Japan) in the next day or so and that may also be weighing on USD sentiment. Asian countries appear to be in the crosshairs for the US Treasury regarding FX policy. Taiwan and South Korea indicated that they have been discussing exchange rates with the US, fueling market concerns that the US may be seeking some adjustments in the USD. It seems unlikely (to us) that any country in the region would agree to a (significant) unilateral revaluation of their currency that would put them at a disadvantage to their regional trading peers."

"And a broader realignment in the USD looks unlikely while countries are still assessing President Trump's tariff policies and their consequences. Still, the chatter can only add to the sentiment that a weaker USD may yet work its way into US trade policy at some point. On the charts, DXY losses through the base of the past month's consolidation range (now resistance at 100.3) risk triggering a renewed (and possibly significant) leg lower in the index; support is 98.9 ahead of a retest of the April low at 97.9. The Treasury is auctioning USD16bn in 20Y bonds (note government bond auctions in Europe were affected by a Bloomberg system problem earlier today)."


Date

Created

 : 2025.05.21

Update

Last updated

 : 2025.05.21

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