[MARKET UPDATE] Strength in DXY weighing on EUR and GBP; a move which comes amidst a pick-up in global fixed benchmarks

Episodes of this kind have historically split two ways: where the rate move is growth-driven, dollar strength tends to be orderly and shared against low-yielders first; where it is term-premium or supply-driven, the correlation between rising yields and dollar strength has been less reliable and has at times inverted. The tell for which regime applies is whether the dollar is gaining broadly, including against the yen, or only against the European currencies, since JPY is the most rate-sensitive of the G3 to the US-Japan differential. Worth watching is whether the rates move originates at the long end or the front, as front-end-led repricing tied to policy expectations has tended to be the stickier driver of FX trends. As a market update rather than a catalyst, the note describes correlation, not cause, and the durability of the move rests on the rate story behind it.