TD Securities analysts signal growing downside risks for the US Dollar, citing a tightening correlation between the currency and the performance of AI-driven US equities.
The US Dollar is facing increased downside pressure as its valuation becomes more tightly coupled with the performance of US equity markets. TD Securities notes that an AI-driven equity rout could trigger a broader sell-off, as cross-asset correlations indicate the USD is highly sensitive to US equity performance relative to global markets.
TD Securities suggests that current cross-asset correlations have tied the Dollar's performance closely to the relative strength of US equities compared to the rest of the world.
TD Securities analysts warn that the US Dollar is increasingly vulnerable to a potential correction in AI-related equities. Heightened cross-asset correlations suggest that a downturn in domestic stock performance could trigger significant selling pressure on the Greenback.
TD Securities notes that cross-asset correlations have shifted, making the USD more reactive to the performance of US stocks, particularly in the AI sector, relative to global markets.