FX Comment

MACRO RESEARCH FX Comment • 3 Aug 2026 • 11:05 CET

FX Comment US Term premiums return, dollar under renewed pressure Lack of forward guidance pushed US yields higher And record weak price action in dollar on FOMC Rise in US term premiums to push USDSEK lower (again)

Renewed US scepticism pushes term premiums Confidence in US assets isn't unwinding through any single event; it's being worn down by a steady Warsh's retreat from accumulation of small frictions; tariff headlines, geopolitical tensions, and market turmoil. This forward guidance has dynamic has been evident since "Liberation Day," when the US stock market initially plunged created ripple effects 12.4% in the days that followed, the dollar sold off, and a Treasury selloff produced the biggest across several asset three-day increase in the 30-year yield since 1982. However, since the worst of that turmoil in April classes. 2025, the dollar has recovered gradually, while USDSEK hit its Q1 2026 lows near 8.80.

Last week's FOMC meeting, and the price action around it, is worth dwelling on. Warsh's retreat from forward guidance has created ripple effects across several asset classes. A three-way dissent and a deliberately thin press conference were enough to send the 30-year yield to its highest level since 2007. The split was also visible across markets: equities read Warsh's dovish dissent as doing the Trump administration's dirty work, while bonds and FX took a very different view. The resulting "bear steepener" suggests the bond market sees last week's decision as an inflationary policy mistake, whereas limited price action at the short end was enough to satisfy equity investors, who had been pricing in roughly a 30% probability of a rate hike. The problem with this price action is that the long end continued to rise despite the Fed's inaction, and more strikingly, the negative dollar reaction following the decision ranks in the 5th percentile of post-FOMC moves, on par with the price action seen during the 2008 financial crisis. The dollar index declined by roughly 1% over just the following day of the meeting, in an otherwise low-volatility environment. The fact that US yields rose over the same period suggests there may be more to read into this than the headline reaction implies.

Among the worse dollar price action in history

Sources: Bloomberg and Handelsbanken Note: 219 meetings since 2000

MACRO RESEARCH FX Comment • 3 Aug 2026 • 11:05 CET

What might worry markets in this environment is the prospect of rising term premiums, where Investors may now be investors demand higher yields to keep absorbing US debt; a dynamic already evident going into wondering whether last week's meeting, and one we pointed out in our FX comments ahead of it. The press Warsh's playbook isn't conference didn't just accelerate this trend; some investors may now be wondering whether so different from Warsh's playbook isn't so different from Trump's after all, a weak-dollar policy. This was also the Trump's after all backdrop to last week's JPY intervention, where the US reportedly assisted the BoJ in weakening the dollar. The fact that EURUSD kept rising during the FX intervention, even as the New York Fed sold European assets, is a notable observation amid the broader turmoil.

Sources: Bloomberg and Handelsbanken Note: FED´s ACM Term premium

Recovery for funding currencies Last week's BoJ intervention was also well timed, in the sense that it took place immediately The prospect of rising following the FOMC decision and the turmoil that followed. The issue with earlier JPY interventions US term premiums may has been a steady rise in Japanese term premiums, while US term premiums have remained be enough to trigger a comparatively static. That may not remain the case, at least not in relative terms, as the spread hit partial, if not larger, possible lows over the summer, and last week's FOMC meeting should put further pressure on US reversal of this years term premiums. A simple regression on 10-year bond yields explains only 45% of the relative stronger dollar trend. development in USDJPY (R² 0.45), while including term premiums raises the same regression's explanatory power to 80%. This…