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FOREX: Trends Extend as USD Index Clears to YTD High

FOREX
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  • The USD is making further progress still early Thursday, with the USD Index clearing the mid-April highs to narrow the gap with the '23 high and next key level at 107.348. Market moves here remain largely momentum-driven, as markets continue to get to grips with the incoming Trump administration and, most importantly, the likely cabinet. Reports yesterday suggested that Howard Lutnick is coming closer to the nomination for Treasury Secretary - a more pro-tariff candidate relative to his rival for the position, Scott Bessent.
  • Yesterday's inflation print prompted only a minor dip in the USD, potentially providing more attractive levels at which to get long the dollar - with the extension of the trend pushing both EUR/USD and GBP/USD to new pullback lows.
  • AUD is finding a more stable footing as local analysts begin to push back forecasts for RBA easing well into 2025 - the jobs data overnight was modestly softer, however the stable unemployment rate keeps inflationary dynamics alive.
  • US PPI data is expected to tell a similar story to the CPI print yesterday, with gradually waning inflationary pressures leaving the Fed to progress with a 25bps rate cut in December. Weekly jobless claims will likely take precedence as markets look to gauge jobs market momentum, after last week's number saw continuing claims edge to a new post-COVID high.
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  • The USD is making further progress still early Thursday, with the USD Index clearing the mid-April highs to narrow the gap with the '23 high and next key level at 107.348. Market moves here remain largely momentum-driven, as markets continue to get to grips with the incoming Trump administration and, most importantly, the likely cabinet. Reports yesterday suggested that Howard Lutnick is coming closer to the nomination for Treasury Secretary - a more pro-tariff candidate relative to his rival for the position, Scott Bessent.
  • Yesterday's inflation print prompted only a minor dip in the USD, potentially providing more attractive levels at which to get long the dollar - with the extension of the trend pushing both EUR/USD and GBP/USD to new pullback lows.
  • AUD is finding a more stable footing as local analysts begin to push back forecasts for RBA easing well into 2025 - the jobs data overnight was modestly softer, however the stable unemployment rate keeps inflationary dynamics alive.
  • US PPI data is expected to tell a similar story to the CPI print yesterday, with gradually waning inflationary pressures leaving the Fed to progress with a 25bps rate cut in December. Weekly jobless claims will likely take precedence as markets look to gauge jobs market momentum, after last week's number saw continuing claims edge to a new post-COVID high.