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Firm USD Bounce Amid Weakness In Equities

FOREX
  • The US dollar index is firmly in the green on Tuesday, rising close to a half a percent. The index has now eroded the majority of the sell-off late last week and importantly has risen back above the previous support level of 95.50.
  • The Euro has been the largest victim of the renewed optimism for the greenback. EURUSD (-0.66%) has significantly fallen back below last week’s meaningful resistance at 1.1383/86. Additionally, EURUSD has continued to grind through short-term support at 1.1358, the 20-day EMA, another bearish development. EUR's status as most liquid funding currency remains a key driver with Fed rate hikes driving sentiment.
  • GBP, AUD, NZD and CHF all lost ground broadly in line with the magnitude of the DXY adjustment. The Swedish Krona also took a plunge, dropping 1.3% against the USD as rising political uncertainty acts as an additional headwind.
  • Outperforming currencies included the Canadian dollar and Japanese Yen which remained broadly unchanged for the session. The former was largely supported by continued buoyancy of crude futures (WTI extending above $85) and the JPY was relatively in favour due to the 1.5% declines seen in major equity indices.
  • Inflation data is due for both the UK and Canada tomorrow which will be key data points before the live central bank meetings over the following fortnight.
  • In terms of speakers, Bank of England Governor, Andrew Bailey, is due to testify, along with BOE Deputy Governor Jon Cunliffe, on the Bank of England Financial Stability Report before the Treasury Select Committee.
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