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USD Index Recovers Towards Trend Highs, Turkish Lira Surges

FOREX
  • Despite yesterday’s sell-off following the weaker than expected US data, the greenback regained its poise on Thursday and the USD index is narrowing back in on trend highs around 104.00 as we approach the APAC crossover.
  • Weaker equity benchmarks and slightly higher US yields have underpinned the renewed optimism for the greenback, with the more risk sensitive currencies in G10 most heavily impacted. AUD, NZD and GBP have all declined around 0.9% on Thursday as markets now await any signals from Chair Powell on Friday regarding the path for US monetary policy.
  • For cable, the pair has pierced initial support at 1.2621, the Aug 14 low and the short-term bear trigger. Further weakness places the key focus on 1.2591, the Jun 29 low and an important support. A break below here would confirm a resumption of the downtrend.
  • Elsewhere, USDJPY had a substantial bounce from the 144.60 overnight lows to trade just below 146 and EURUSD was slowly grinding south throughout the session, hovering around 10 pips above the 1.0800 mark.
  • In emerging markets, a bumper rate hike of 750bps from the CBRT has placed the Turkish Lira as the best performing currency. USDTRY is down an impressive 5.8% after the central bank ramped up their tightening to establish the disinflation course as soon as possible and to anchor inflation expectations.
  • Tokyo Core CPI data is due overnight before German IFO data for August. Aside from final UMich sentiment data and inflation expectations, all focus will be on the Jackson Hole symposium and associated central bank speakers.

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