The outlook for the dollar continues to be driven by Treasury yields and with the yields dropping back the dollar is coming under corrective pressure. With the 10 year Treasury yield falling back to 2.40% (which is the lowest since 9th December) the US Trade Weighted Dollar Index has also fallen away and is testing the support of the late December low at 101.90. A closing breach of this level would confirm the dollar having become corrective. This move on Treasury yields is not being driven by the FOMC minutes, which actually showed a concern that expansive fiscal policy might drive a need for steeper tightening. This is seen as a clear nod towards President-elect Trump, although he was not mentioned by name. Equities tend to struggle during tighter monetary policy and there is a mildly lower move seen in Europe today.
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