Dollar: Weakness May Stabilize as US Growth Advantage Persists - BBH

Brown Brothers Harriman analyst Elias Haddad notes that the Treasury's buyback announcement initially pushed long-dated Treasuries lower, weakened the dollar, and boosted gold, but the dollar's decline should stabilize this week. The core view is that the US growth advantage will continue to support the dollar, offsetting market concerns over fiscal conditions.

**Fiscal Buyback Triggers Short-Term Volatility**

According to Haddad's analysis, the immediate reaction to the Treasury buyback announcement was pressure on long-dated bond prices, a softer dollar, and gold buying. This linkage reflects the market interpreting the buyback operation as a signal of fiscal pressure, with funds briefly retreating from dollar assets. However, this event-driven selling reflects more of an emotional release than a trend reversal.

**Growth Advantage Forms Core Support**

Haddad emphasizes that the US economic growth advantage relative to other major economies remains unchanged. As long as this fundamental logic persists, the dollar lacks a basis for sustained deep declines. Fiscal concerns alone are insufficient to push the dollar into a downward channel unless subsequent data significantly undermines growth expectations.

**Gold Boosted but Needs to Watch Dollar Stabilization**

Spot gold is currently trading near $4672.54385, having been lifted by dollar weakness and the buyback announcement. If the dollar stabilizes this week as Haddad expects, gold's short-term upside momentum may correspondingly fade. Market focus will shift to whether US growth data continues to validate the "exceptionalism" narrative, and further developments on the fiscal front.