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Greenback On Firmer Footing As US Yields Move Higher

FOREX
  • The USD index trades closed to unchanged on Thursday, having recovered from an initial 0.5% sell-off earlier in the session. The more optimistic backdrop for equities had initially placed pressure on the greenback, however, the move higher for US yields supported the greenback bounce.
  • The most notable reversal has been seen in EURUSD, following some mixed PMI data in early European hours. Generally, the data fared better than expected, with the Eurozone and French figures topping forecast, and countering modest weakness in Germany manufacturing. EURUSD traded as highs as 1.0888 before a consistent grind back towards the 1.08 handle ensued.
  • G10 FX implied vols extend recent lows, with EUR/JPY 6m implied nearing on 8 vol points and the lowest level since Feb'22. With lower vols tied to JPY weakness over the past 12 months, EUR/JPY has extended the YTD rally, putting the cross within range of key resistance at the bull trigger of the cycle high from late 2023 at 164.30.
  • Indeed, USDJPY remained buoyant on Thursday and likely was supported by the higher core yields. Highs of 150.69 bring the pair ever closer to resistance at 1.5089, the Feb 13 high, before 151.43, the November 16 high.
  • Higher equities continue to keep NZD as one of the best performing majors, extending its impressive run in recent days. NZDUSD now stands 2.5% above the Feb 14 lows, breaching the 50-day moving average in the process and breaching 0.6200 for the first time since Jan 16.
  • New Zealand retail sales kick off the Friday docket, while Japan will be out for a national holiday. German final GDP and IFO sentiment data will cross in Europe, in an otherwise quiet data day to end the week.
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