August 02, 2022 17:49 GMT
- The greenback has been significantly boosted on Tuesday in conjunction with a substantial move higher across US yields. Notable comments from Mary Daly on the Fed being "nowhere near done" on curbing inflation and subsequent Fed speak were largely responsible for the turnaround and subsequent pressure on US treasuries. The price action supported the USD index (+0.80%), which is set to snap a four-day losing streak.
- Equity markets shrugged off the ongoing tensions surrounding Speaker Pelosi’s trip to Taiwan and following her safe landing, major benchmarks staged a strong recovery, rallying to the best levels of the session. In sharp contrast to the APAC session, firmer risk sentiment proved enough to place downward pressure on the Japanese Yen, prompting USDJPY to stage a significant recovery. Even with the latest renewal of pressure in equity markets the USD remains firmly on the front foot with USDJPY extending its recovery to 250 pips.
- USDJPY’s 130.41 low came within close proximity of key support at 130.24, the 100-day MA, a level last crossed in September 2021.
- AUD remains the worst performer in G10 following the RBA delivering the widely expected and largely priced 50bp hike at the end of it August meeting. However, the formal introduction of some well-used phrases to the post-meeting statement left a dovish tinge to the post-meeting takeaway.
- Wednesday's data focus will be on US ISM Services PMI. Later this week, the Bank of England’s monetary policy decision on Thursday precedes Friday’s US employment data.