USD/CHF, DXY flows - Shifting recent leadership, cross-mkt dynamics
Dollar trading pro-cyclically with AI/tech risk at present, amplified through yield responsiveness - a turn around from US bond leadership
Basic rolling correlations of various co-trending relationships highlight how the market leadership and the cross-market dynamics have shifted, making the dollar far more exposed to AI/tech gyrations and pulling the likes of CHF back into the haven and carry unwind camp more broadly.
US-led exceptionally driving up yields but with little reliable spillover to risk so driving up the dollar earlier in the year, to AI cash burn concerns fuelling the equity pullback and dip back into cheaper bonds, pulling down yields and the dollar. Very long dollar positioning tending to amplify the impact of sharp risk-off bursts too with positioning caught offside.
This looks set to remain a key near-term driver, especially with the Nasdaq currently slipping through the bottom of the Aug range, potentially opening up space to stretch back into the late July lows, and possibly shaping out more of nearby top. This week's fast move down needs to quickly prove a false break and spike low, squeezing back into the late summer range, if further follow through equity>bond>dollar spillover is to be neutralised heading into next week.
US elections are certainly a 'wild card' overlay factor, especially if the election results prove contested, but it would probably take something quite dramatic at this point to be trumping the current dominant drivers.