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Renewed Optimism For Equities Weighs On Greenback

  • A slightly higher-than-expected US ISM Services gave a very brief boost to the greenback, however a moderate decline in the prices paid component was enough to sap any momentum for the move. Overall, the USD index is posting losses of around 0.35% on Friday, a partial pullback from yesterday’s, however currency markets have maintained tight ranges ahead of the weekend close. Additionally, participation has been low, with volumes and activity generally comfortably below recent averages.
  • The softer tone for the US Dollar is reflective of a more optimistic mood across equity markets with e-mini S&P 500 futures rising around 1.3% on Friday. The more positive backdrop amid lower US yields has benefitted the Japanese yen, with USDJPY sliding back towards 136.00, having briefly tested above 137 on Thursday.
  • In similar vein, GBP is towards the top of the G10 leaderboard. Sterling trades more favourably due to an upside revision to the final February services and manufacturing PMI releases. Despite the bounce, GBPUSD trend conditions are bearish and key resistance at 1.2147 has remained intact.
  • AUD has also firmed amid the positive risk backdrop, however, NZD has underperformed on the session. Price action in AUDNZD looks to be short-covering and a recouping of the losses posted earlier this week. The 50-day EMA at 1.0886 looks to have capped the topside and may prove influential with next week’s RBA decision on the docket.
  • Elsewhere next week, central bank decisions in both Canada and Japan will precede the key US employment data on Friday.

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