Macro data should start to turn more in favour of a correction lower in yields, marking a turn for USD – MUFG

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Economists at MUFG Bank analyze the Beige Book released last week and its implications for yields and the US Dollar.

The Fed seems more mindful of impending slowdown

Our natural language sentiment indicator of the wording in the latest Beige book to describe the US economy shows that on balance there was a greater share of negative words overall. It was the most negative sentiment score since May. It stands in contrast to the trend for most of this year of improving sentiment scores. The deterioration in the overall sentiment score was driven mainly by more negative descriptions of the economy, the consumer, housing and financial conditions. 

We certainly will need to wait to see some evidence in the official data, which may take time, but our text sentiment analysis of the Beige Book, the comments from Harker on Friday and Powell’s more cautious tone on the restrictiveness of the monetary stance make us more confident that the flow of macro data should start to turn more in favour of some correction lower in yields that would mark a turn for the Dollar too.