USD insensitive (so far) to Fed’s possible rate hike

According to UBS’strategists:

« Since our last FX Atlas in early July, market pricing for a December hike has risen from near zero to more than 50%, and US 10-year yields have risen nearly 30bp. Yet neither has been much help to the dollar, which remains locked in an extremely narrow range, and on a trade-weighted basis, is actually a bit weaker during this time. »

Later they write:

« We continue to see the dollar as having peaked on a trade-weighted basis versus DM currencies, the euro in particular. Fair value models indicate that the euro remains cheap, and with the growth gap between the US and Euro area shrinking, we continue to forecast a grind higher to our year-end target of 1.16. »

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