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Dollar slump may stabilize as US growth edge offsets fiscal concerns

BBH expects the dollar decline to pause this week, citing composite PMI-driven growth outperformance even as Fed policy pricing still leans toward some tightening.

Reported · Written up by our desk · Major Pairs

Brown Brothers Harriman’s Elias Haddad said last week’s Treasury buyback announcement initially rattled longer-term Treasuries, pushed the dollar lower, and helped lift gold, but he expects the currency move to stabilize over the current week.

BBH argued that a widening US growth advantage versus other major economies, reflected in composite PMIs, can offset some structural pressure tied to US fiscal credibility.

The note also highlighted that markets are still implying modest further Fed tightening, with Fed funds futures pricing a 40% probability of a 25 basis point hike at the September 16 meeting and nearly 50 basis points of tightening over the next 12 months, though BBH said risks are skewed toward a dovish repricing.

BBH pointed to upcoming data as key catalysts, including ADP private employment for the week ending August 8 and expectations for July PCE inflation to remain contained, with real personal spending forecast at 0.0% month over month.

Latest closeGold $4,432.00 ▲1.6%

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