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ISM Services/Fed's Clarida Spark Dollar Squeeze

FOREX
  • Following a miss in US ADP employment, the USD had been underperforming with broad dollar indices roughly 0.3% softer, following the data.
  • Comments from Federal Reserve's Richard Clarida, perceived as marginally hawkish, coupled with the strong beat in US ISM Services data (particularly the inflation component) sparked a sharp greenback recovery, which then extended through the best levels of the day.
  • The Vice Chair said the central bank could begin to raise interest rates in early 2023 if employment and inflation continue to progress as expected. Stating the inflation outlook risks remain to the upside, the US dollar continued its upward trajectory.
  • The most significant squeeze was seen in USDJPY. Hovering just off the 108.72 lows, the pair spiked back above 109 as fresh shorts were covered and the rally extended to fresh highs of 109.67, erasing much of the week's selloff.
  • EURUSD fell short of resistance at 1.0910 and slipped rapidly to the worst levels in 5 days sub-1.1850. The dollar index remains up 0.2%.
  • Similar moves were seen in the greenback against, GBP, AUD and CHF, however CAD and NZD held more narrow ranges throughout US hours.
  • Kiwi remains top of the G10 pile as overnight gains were consolidated following New Zealand's labour market data beating expectations across the board and another round of hawkish RBNZ repricing.
  • Headline event risk on Thursday includes the Bank of England MPC meeting where the sequencing review will require particular attention. Smaller items on the calendar include Aussie trade balance, German factory orders and US initial jobless claims.
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