Global backdrop proves “just right” for more USD weakness

Currencies were no exception to the calm across markets, and the US dollar seems set the end the week a bit lower against most currencies. While “more of the same” downbeat data out of the euro-zone weighed on the euro, most other G10 currencies benefitted from the backdrop of strong appetite for risk and rising bond yields relative to the US. PCE data out of the US and more PMI data next week (including the US ISM survey) are set to be released next week, and we think the bar is relatively high for these data to shake the “Goldilocks” narrative that has taken hold in markets over recent weeks. For now, it looks likely that the dollar strength we anticipate on the back of disappointing economic activity in the US and other DMs might not materialise until early next year.