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Rising Yields/Falling Equity Indices Buoy Greenback, GBP Plummets

FOREX
  • Pound Sterling came under significant selling pressure on Tuesday as market concerns surged over the fuel crisis sweeping the UK potentially leading to a sharp slowdown in growth.
  • GBP rose over 1% against both the Euro and the Dollar and in the process has cleared a host of key supports. The triangle base at 1.3637 in cable, drawn from the Jul 20 low has been breached and this has led to a move below 1.3602, the Aug 20 low. While 1.3520 support has held for now, the focus is on weakness towards 1.3462 next, 50.0% of the Sep '20 - Jan bull phase.
  • Rising US yields and pressure on equity indices kept broad dollar indices in favour, rising just shy of 0.5%. Three straight days of gains has prompted the DXY to rise to the best levels since November 2020. Key resistance at 93.73, Aug 20 high has been breached and a sustained break of this hurdle would confirm a resumption of the underlying uptrend and target 94.30 Nov 4, 2020 high.
  • Elsewhere, antipodean FX were clear underperformers, retreating well over half a percent. Evidence of the broad dollar theme developing was most notably signalled by JPY and CHF also losing ground against the greenback, matching CAD losses of around 0.4%.
  • Risk dynamics also weighed on EM FX with the JPM emerging market currency index falling 0.65%. Noteworthy moves were seen in USDMXN (+1.20%) and USDZAR (+1.07%).
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