After US stock market decline, USD strengths, DXY at new high. Fitch Ratings, a credit rating agency, has expressed concerns about the ongoing debt ceiling negotiations in the United States. As a result, they have placed the United States’ AAA rating on a negative rating watch. Fitch Ratings believes that these negotiations increase the risk of the government potentially defaulting on certain financial obligations.
This situation implies that the yields on T-bills will increase to offset the risk involved after the potential downgrade of the United States’ rating. The downgrade would impact the lowest benchmark borrowing rate, known as the risk-free rate. Higher yields are generally unfavorable for both stocks and bonds, and they can have a negative impact on the overall economic condition.
DXY, has made a sharp strong upward move, representing the fifth wave of a larger pattern. There is still potential for it to reach levels around 104.30-104.60 then we should correct toward 103.
Mohamad Youssef
