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Greenback Trades Steadily North Amid Higher Core Yields

FOREX
  • Higher-than-expected inflation readings from both Spain and Belgium set a bearish tone for European rates early Monday and this sentiment benefitted the single currency, seeing EURUSD pop back above 1.09, weighing on the broad dollar index. However, higher core yields and the more cautious tone in equity markets eventually filtered through to a more supportive backdrop for the US dollar and the greenback has reversed steadily higher throughout Monday, extending on session highs in recent trade.
  • All other G10 currencies are now in the red against the USD with dampened sentiment and lower commodity prices especially weighing on the likes of AUD and CAD, which have both shed around 0.5% to start the week. In the same vein, both SEK and NOK are the worst performers, dropping just shy of 1%.
  • USDJPY has posted an impressive turnaround amid the higher yields. After printing lows of 129.21 on the back of a publication from Japan that noted the BoJ and government should commit to longer-term policy objectives around inflation, the pair has been stubbornly bid and now trades above 130.50 approaching the APAC crossover. On the topside, clearance of 131.58 would be required to indicate a meaningful bullish technical development, signalling a short-term reversal and opening 133.64, the 50-day EMA.
  • Worth noting month-end tomorrow, where Barclays’ passive rebalancing model points to strong USD selling against all majors except the EUR where the signal is moderate.
  • All the focus remains on major central bank decisions from the Fed, the ECB and BOE later this week.
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