The dollar offset some of its recent losses, but remains under pressure, as the inversion of the US Treasury bond yield curve raises concerns about a possible recession.
Investors continue to be nervous because of the inversion of the yield curve between three-year and five-year US government bonds and between two-year and five-year ones. At the initial stage of the inversion of the yield curve, markets should understand whether there will be a recession. In this position, they react more aggressively to weaker than to strong data, so the dollar is likely to be in the "correction mode".
Raising interest rates will lead to an increase in the yield of short-term securities, even if the expectation of a slowdown in economic growth will lead to a decrease in the yield of long-term bonds. However, Fed Chairman Jerome Powell said that interest rates in the United States were already close to neutral levels, according to markets, these comments signal a slowdown in rates hikes. The spread between three-month treasury bills and 10-year-olds was 50 basis points, which is the lowest since October 2007. One thing is for sure, the Federal Reserve may slow down interest rates, but it will not exactly lower them. Considering all these circumstances, the dollar will have to take a pause anyway. So far there are no specific reasons for a recession, but there are also none.
