US Treasury yields on the long end have risen to their highest level since November, dampening risk appetite and putting the S&P 500 on track for its third consecutive weekly decline. At the same time, the global commodity index has risen by 11% so far this year while geopolitical tensions arise. Taken together, this has created a perfect environment for the Greenback to shine, as its benefiting from its position as a high yielding, high growth, commodity backed safe haven currency. As central banks outside the United States continue to lay the groundwork for rate cuts, policy divergence and momentum will favor the reserve currency. The US Dollar Index appreciated for a fourth consecutive day, extending its year-to date gain to 4.7%. However, it will be interesting to see how much of this shift has already been reflected in markets and how much more rate cuts can be priced out for the Federal Reserve. This is hard to answer right now due to the current push (global inflation impulse rising) and pull (weakening leading economic indicators) effects influencing the dollar and Fed pricing.
Global macro backdrop supported the dollar in 2024