The USD is trading defensively, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

USD trades broadly lower

“US yields continue to retreat, with 2Y yields slipping to a two-year low today, as US equity futures trade in the red. Losses in US yields—and the USD—picked up in overnight trade around the US presidential debate which VP Harris appears to have won. Markets may also be front running this morning’s US inflation data to some extent. US CPI data for August are expected to show some further moderation in headline prices but stalled progress on core measures.”

“Headline CPI is forecast to rise 0.2% M/M and 2.5% over the year (down from 2.9% in July—note Scotia is a little higher than consensus at 2.6%). Core prices are also forecast to rise 0.2% in the month but remain at 3.2% over the year. A modest upside surprise is unlikely to move markets significantly, with the Fed’s attention clearly on the labour market. Price action suggests markets may be concerned by the risk of weaker data which would likely result in markets pricing back in some risk of a more aggressive Fed rate cut next week.”