US dollar extends gains on the back of rising T-yields

The US Dollar extended last US session’s gains, but the upward momentum is seen as weak. The US reported positive housing market data, and the 5- and 10-year US Treasury yields recovered, while the shorter-term 2-year rate declined.

The Dollar Index climbed higher on Wednesday, rising towards a six-day high of 106.52. The focus is now on the US’ economic situation as markets await data to model their expectations on the next Fed’s decisions.

The strongest case is that the bank won’t deliver any additional hikes in 2023, but Gross Domestic Product (GDP) preliminary estimates from Q3 on Thursday and Personal Consumption Expenditures (PCE) figures from September on Friday may change those expectations.

September new home sales exceeded expectations, according to the US Census Bureau. The headline number for new home sales was 0.759 million, which was higher than the 0.68 million consensus. The US 10-year yield was down to 4.90%, while the 5-year yield was up to 4.87%. The likelihood of a December increase of 25 basis points is still low, at about 25%, and a pause in November is almost fully priced in.