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Lower Yields Ignite An Extension Of USD Weakness

FOREX
  • A developing theme in the aftermath of the payrolls report has been a souring of greenback optimism, which extended once again on Tuesday. The Japanese Yen outperforms with USDJPY sliding back below 146 and EURUSD extending gains above parity.
  • A slightly strange session for risk as an initial rally across equity markets was met with a significant rout across the cryptocurrency market, potentially bolstering the sentiment for gold, which saw 2.2% gains throughout the session.
  • Currency markets appeared to take this volatility in its stride and the lower yields weighed on the greenback throughout US trade.
  • EURUSD had consolidated much of the European session around parity, however, once breaking yesterday’s highs around 1.0030, the single currency appreciated sharply to the next target of 1.0094, the high on Oct 27 and a technical bull trigger. Despite a brief pullback, the pair maintains a supportive tone ahead of the APAC crossover.
  • Similarly in cable, despite pulling back to 1.1430, the broad USD weakness saw the pair rally aggressively before topping out at 1.1600.
  • The Japanese Yen is leading G10 gains on Tuesday, as the lower yields work against the favourite trade of 2022. Furthermore, interventions to strengthen the yen continue to linger for short-sellers, especially as we approach the important US CPI data on Thursday.
  • Chinese CPI/PPI data is due overnight before another light day for European/US data on Wednesday.
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