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Greenback on Front Foot as Markets Favour Debt Ceiling Resolution

FOREX
  • The USD is firmer against all others in G10 early Thursday, adding to gains noted across Asia-Pac hours. Stock markets are on the up alongside the dollar, providing further evidence that markets see the dollar and equities firmer on any debt ceiling resolution ahead. President Biden is conducting G7-related meetings in Japan, meaning headlines may be more muted over next few days, ahead of a planned press conference on Sunday.
  • USD/JPY is among the more notable market movers Thursday, tipping to a new 2023 high at 137.94 having shown above the mid-March highs. Mid-December highs sit just above at 138.17.
  • NOK is the poorest performer across G10, putting NOK within range of 2023 lows against the USD. EUR/NOK is similarly higher, with the cross having rejected any test of 50-dma support of 11.5033 earlier this week. 11.7681 marks the next level of note, the 61.8% retracement for the Late-April / early-May downleg.
  • The firming greenback (buoyed by renewed debt ceiling hopes) is weighing on emerging market currencies, however other idiosyncratic EM stories are adding additional pressure (China growth concerns, South African infrastructure issues/diplomatic spat with US). This led the MSCI EM FX index to shed the entirety of the early May gains and close at the lowest level since mid-March yesterday. The index broke a multi-month uptrendline posted off the mid-October lows.
  • Weekly jobless claims data is the highlight Thursday, with existing home sales also on the docket. The central bank speaker slate should be of more interest, with BoE's Bailey and Fed's Jefferson, Barr and Logan all set to speak.
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