Dollar gains as risk aversion returns on Fitch’s US downgrade and surging Treasury issuance

  • Dollar rises as Treasury yields hit 2023 highs on ADP report and rising debt issuance
  • US firms add 324,000 in July, exceeding all estimates (140K to 280K)
  • Fitch downgrades US on fiscal deterioration over next 3 years and surging debt burden

US stocks are getting hit with a one-two punch as Fitch’s US sovereign downgrade overnight and on expectations the US Treasury will continue to boost the size of their debt sales.  Earnings have been still coming mostly better than expected but the major indexes don’t seem to have anything left in the tank to take Wall Street back to record highs. ​

The US credit rating downgrade should not have been a surprise for investors that have been following Fitch’s comments, but the timing surely caught everyone off guard.  The Japanese yen initially benefited the most, but eventually the dollar steadied as safe-haven flows broadened.

Wall Street can’t ignore what is happening with fixed income as Treasury yields surge after the Treasury had to increase the size of their planned quarterly sale of longer-term debt for the first time in over 2 ½ years.

Equity traders are using this surge in yields and some nervousness ahead of Apple and Amazon’s earnings as an opportunity to lock in some profits.  Next 48 hours will be key for risk appetite as earnings and the NFP report might sway markets in thinking we might need to see more Fed tightening.


The dollar rallied against the euro as FX traders start as risk aversion runs wild on Wall Street.  The euro is looking vulnerable here as price action is testing key support around the 1.0950 area.  All the headlines are supporting the dollar trade and that could see momentum buying if equities have a decent pullback going through Apple earnings and Friday’s NFP report.

US Data

Private sector hiring looks like it doesn’t want to cool. The ADP private payrolls reported 324,000 jobs were added to the private sector, much higher than the 190,000-consensus estimate.  Wall Street typically shrugs off the ADP report, especially considering we have only seen a year of its reporting with their new methodology.  This is still an impressive print and should support the Fed hawks argument that the labor market is still tight and that they might not yet be done with raising rates.

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Ed Moya

Ed Moya

Contributing Author at OANDA
With more than 20 years’ trading experience, Ed Moya was a Senior Market Analyst with OANDA for the Americas from November 2018 to November 2023. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Prior to OANDA he worked with, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business, cheddar news, and CoinDesk TV. His views are trusted by the world’s most respected global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Seeking Alpha, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.