Euro Could Go Lower From Here, Yu Says

The November 4 Treasury refunding serves as a critical test for financial conditions, as any unwarranted loosening could force the Federal Reserve to implement offsetting measures to combat persistent inflation. Financial conditions are defined by the interplay of spreads, yield levels, equity markets, and the U.S. dollar, with the dollar's status as a reserve currency providing an intrinsic advantage that complicates policy maneuvers. Geoffrey Yu, a strategist at BNY, argues that volatility cannot be suppressed but only redistributed across asset classes, noting that efforts to dampen fixed-income volatility often manifest in foreign exchange, gold, or Bitcoin. While high real rates continue to attract international investors, structural fiscal issues require active resolution rather than policy stagnation. Selective carry trades in Asia-Pacific currencies like the Korean won and Taiwan dollar offer potential year-end outperformance, even as the Euro faces downward pressure against both the dollar and other major crosses.