The carry trade suffered a stress test yesterday, when one popular target currency, the Hungarian forint, had to cope with prospects of wider budget deficits. After selling off 0.7%, the forint is already coming back bid. With volatility expected to stay low, it's hard to see any major unwinds of carry strategies in the near term
Forex Markets are going bonkers since Powell's dovish speech at the Jackson Hole conference.
The US Dollar is getting sold off aggressively as the Market interpreted dovish signs for a cut in the September, even in a relatively nuanced speech – Markets didn't need much!
The dollar is drifting higher ahead of a key speech from Fed Chair Powell today. Driving that has been some slightly better business confidence data, questioning whether the Fed needs to cut in September. We doubt the dollar has to rally too much further. Behind the scenes, it seems that foreign central banks are quietly leaving the US Treasury market
