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Dollar Index Extends Bounce As US Yields Edge Higher

FOREX
  • The dollar remained underpinned throughout Tuesday's session as US markets returned from the Labor Day holiday.
  • Both higher U.S. yields, combined with a softer tone for equities/commodities provided the USD with solid demand. The dollar index extended on Monday's gains, recovering from a poor streak culminating in a weak headline NFP print last Friday.
  • The Canadian Dollar (-0.8%) was the weakest among G10 currencies with weaker risk sentiment and the higher greenback fuelling demand for USDCAD. In similar fashion, both AUD and NZD fell over half a percent.
  • With EURUSD trading higher Friday on the weaker-than-forecast NFP release, the pair touched but failed to break key resistance at the Jul 30 high of 1.1909. This level remains a key hurdle for bulls. On the downside, the support to watch is 1.1735, Aug 27 low. A break would suggest the recent rally is over.
  • EMFX was also on the backfoot given the elevated US yields and stronger US dollar, with the Chilean Peso (-1.00%) and the Turkish Lira (-0.78%) faring the worst.
  • Tomorrow, markets will await the September Bank of Canada decision/statement. The BOC will likely try to avoid creating any political talking points less than two weeks ahead of the snap federal election on September 20.
  • The domestic UK highlight of the week will be the Treasury Select Committee hearing tomorrow with MPC Governor Bailey and members Broadbent, Ramsden and Tenreyro all due to testify.
  • Highlights in the U.S. will be July Jolts data and the Fed's Beige Book before markets prepare for the EBC statement/press conference on Thursday.
Energy BulletsCommodities
Energy BulletsCommodities

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