I spoke with Reuters earlier today about the US dollar and this is what came out:
“The market is slowly pricing in a worse outcome this winter in Europe and that’s the major reason the dollar’s stayed so strong,” said Adam Button, chief currency analyst at ForexLive in Toronto. “While the U.S. outlook is deteriorating, it still looks better than Europe and much of Asia.”
TTF prices later reversed and that's helped to life the euro back to unchanged on the day.
There were two other things I spoke about that I think are important.
1) Equity flows are an increasing factor for the US dollar.
2) The yen is losing its safe have status
The second point is a big one and is a tipping point in the global foreign exchange landscape. The yen used to be a relief valve for the US dollar at times of risk aversion but with the BOJ stridently committed to yield curve control, that market kneejerk reaction appears to be breaking.
The Reuters report touched on it:
The U.S. currency has also benefited from safe haven flows as weak Chinese data and a surprise rate cut by China’s central bank on Monday raise concerns about global growth.
The dollar has “supplanted the yen as the preferred safe haven in the fx market,” said Button.
That could be a lasting factor that will create a significant USD overshoot in the year ahead.