A mild weakening of the US dollar has coincided with bull flattening of the US Treasuries curve this week, with the 10-year yield falling over 10bps across the course of the week from 1.6709% to 1.56%. This dynamic comes in spite of strong retail sales, inflation and labour market data from the US, suggesting that markets are becoming numb to the narrative of US economic outperformance and that the Federal Reserve is anchoring expectations well, keeping the front-end of the curve relatively stable; a key premise of our argument for mild USD weakness outlined in our latest USD outlook. Next week, investors will keep an eye out for the overdue FX report from the US Treasury department, while ECB, BoC and CBR meetings sit prominently in the calendar. Prior to the BoC, however, is the Canadian budget, which is due on Monday.
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