USD Index To Fresh Cyclical Highs

The USD DXY index has touched fresh cyclical highs of close to 109.40. We have to go back to 2002 for higher levels. Dollar strength has been broad based against both the majors and Asian FX. JPY, GBP and NOK have been the weakest performers in the G10 space, although AUD is not far behind.

• Focus has rested on US yield moves, with the 2yr getting back to levels last seen in 2007 (+7% to 3.466% today). It has been slightly shaved on the day by the 10yr (+8bps to 3.12%).
• This remains a key source of USD support, while other cross asset signals have remained supportive as well. Asia Pac equities are a sea of red, with tech related bourses down sharply, while China has seen some outperformance in the equity space.
• US futures are in the red but away from worst levels (last 4030.25, versus earlier low of around 4005).
• The weaker equity backdrop has little to support the yen. USD/JPY is back to 138.60/65, highs back to July 21 of this year.
• GBP/USD is down to sub 1.1670, fresh lows going back to early 2020, while USD/NOK is back close 9.8200.
• Commodities are also weaker (ex Oil). This has weighed on AUD/USD, along with the factors outlined above. There is some support below 0.6850, with the strong retail sales beat of +1.3% versus +0.3% expected, helping at the margin. NZD/USD has seen support emerge around 0.6110.
• EUR/USD is lower, but stabilized after breaching 0.9920.
• Coming up, note that it is the UK Bank holiday today. Further out, a speech from ECB Chief Economist Lane is due, followed by the Dallas Fed m’fing activity data, and Fedspeak from Fed Vice Chair Brainard.