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USD Index Extends Retracement Lower Amid Equities Recovery

FOREX
  • Following Tuesday’s strong advance for the greenback on the back of hotter-than-expected inflation data, the past two sessions have seen the greenback steadily reverse lower. The USD index is up a further 0.40% on Thursday and has been assisted lower by the impressive recovery for major equity indices and e-mini S&Ps within close proximity of the all-time highs for the index.
  • Associated gains for G10 currencies were broad based, with the likes of AUD, NZD and CAD all moderately outperforming and the Swiss Franc the major beneficiary to the more optimistic risk sentiment across global markets.
  • USDCHF has declined 0.7% on the session but in the broader context remains around 5.5% above the December low, with the softer-than-expected local CPI data stoking the most recent CHF weakness this week.
  • Overall, intra-day volatility was spurred on by a weaker set of January retail sales data in the US, however, firmer Philly Fed and Empire Manufacturing data quickly offset the greenback dip. USDJPY reached as low as 149.57 on the data from the earlier 150.58 highs, but has since settled around mid-range and close to the psychological 150.00 mark.
  • EURUSD rose in line with the moves for the greenback, breaching its initial resistance point of 1.0750 (50% retracement for this week's downleg) and has continued to narrow the gap to the 50-dma which resides at 1.0796.
  • UK retail sales data headlines the European docket on Friday before focus turns to US PPI figures and building permits. Preliminary UMich consumer sentiment and inflation expectations will round off the week.
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