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Broad Greenback Weakness Persists, GBP Soars 1.4%

FOREX
  • Despite the US Dollar gapping higher at the open, the greenback has resumed its weakening bias that ensued following the US employment release on Friday amid ongoing optimism surrounding the potential relaxation of Covid measures in China and the underlying supportive tone for equity markets.
  • The USD index (-0.71%) comfortably traded through last week’s lows and now resides roughly 2.4% below the post-NFP high. Price action has been extending below the 50-day moving average which intersected at 111.21 today. Fairly consistent and broad-based USD weakness extended towards the end of the European session, with EURUSD climbing back above parity and GBPUSD testing the 1.15 handle.
  • Little immediate resistance of note for the single currency may pave the way for a move towards 1.0094, the high on Oct 27 and a technical bull trigger.
  • For cable (+1.36%), consistent demand has seen a clean break of the 50-day exponential moving average at 1.1429 and further strength now brings into focus 1.1566, the October 27th high.
  • The Yuan matched the US Dollar's underperformance as the central bank dialed back its support for the currency via fixings and the strong performance for major equity indices was unable to filter through despite other EM currencies continuing to perform well such as the ZAR (+1.05) and MXN (+0.42%).
  • US Mid-Terms are likely to dominate the newsflow over the course of Tuesday, however, markets will remain focused on the US inflation release due Thursday.
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