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USD Index Steps Lower On The Week Amid Optimism For Equities

FOREX
  • Surging equities this week weighed on the greenback overall with the USD index down -0.37%. However, the moderate downward adjustment was capped by a further uptick for front-end US yields as Fed officials continue to strike caution on premature monetary easing.
  • Friday’s price action was mixed across G10 currencies, with major pairs making very limited adjustments amid a session void of meaningful data releases. Overall, NZD remains one of the best performers on the week, underpinned by the more optimistic risk backdrop.
  • NZDUSD now stands around 2.6% above the February lows, with the pair set to close at its best level since mid-January and AUDNZD set to close below 1.06, levels not seen since May last year. Moves come ahead of the RBNZ decision next week, where MNI expect the RBNZ to leave rates on hold at 5.5%, even though the labour market data were stronger than expected.
  • While USDJPY was unable to make a test of last week’s highs, price action this week has seen a consolidation above the 150.00 mark as cautious Fed remarks maintain the attractive carry profile.
  • Recent fresh cycle highs confirm, once again, a resumption of the uptrend and note that last Tuesday’s gains resulted in a break of 149.75, the Nov 22 high. This signals scope for a climb towards 151.91/95, the Nov 13 ‘23 high and the Oct 1 ‘22 high and major resistance.
  • Next week, the focus will be on the US January PCE deflator (out Thursday), which will be the last reading of the Fed's preferred inflation gauge before the March FOMC meeting. Later in the week, Eurozone February flash inflation readings begin next Thursday with France, Spain and Germany. The Eurozone-wide estimate is released on Friday.
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