EUR/USD fell below the 10-DMA Monday and has nearly erased the entire rally induced by Fed Chair Jerome Powell’s less hawkish renomination testimony as investors leaned towards the Fed becoming more aggressive on rate hikes while the ECB remains accommodative. Hot-running inflation continues to be a major issue for investors and oil’s LCOc1 rally to a 7 1/2-year high and ongoing supply chain issues reinforce worries that higher prices will persist. Interest rate markets indicate investors expect the Fed will have to become more hawkish. Eurodollar prices EDH2 fell to ...

USD: Fed’s terminal rate now expected at 1.80% What seemed like a compelling theme last week to explain FX market price action lost some support yesterday. Last week’s dollar weakness was being ascribed to higher US yields denting US growth/tech stocks and triggering a rotation into the more heavily value-weighted equity markets in Europe. Yesterday, US yields rose and US tech stocks dropped but the dollar rallied broadly. We would take a more vanilla approach to FX where the proximity of Fed lift-off is triggering bearish flattening of the US ...

The dollar held near a weekly high on Wednesday after a surge in U.S. yields resulted in sharp gains this week against the euro amid growing bets the Federal Reserve will raise interest rate. Sterling was flat against the dollar after data showed British inflation rose 5.4% in December, to its highest level in 30 years, raising rate hike expectations. Ambrose Crofton, Global Market Strategist at J.P. Morgan Asset Management, said he expects the Bank of England will raise interest rates by 25 basis points in February. “The strength of ...

The dollar’s slump, despite a raft of positive news that should be the springboard for a strong start to the year, is puzzling. But puzzled or not, hedge funds are sticking to their guns, betting that the greenback will soon bounce back. Pulling back the lens a little, the dollar was on the skids before the turn of the year. It has now weakened four weeks in a row for the first time since July 2020 and only the second time in three years. In a mirror image of last ...

USD: Room to re-build long positions US markets re-open today after yesterday’s holiday closure, and stock futures point at a negative open in US and European equities after a mixed Asian session. The dollar stabilised after Friday’s recovery against most G10 currencies, although the commodity FX segment was supported with, once again, the oil-sensitive NOK and CAD outperforming the rest as crude prices kept inching higher. Today, data will be back in focus in the US, with the Empire Manufacturing index for January set to fall due to Omicron impact. ...

The yen stumbled on Tuesday as U.S. Treasury yields rose to new near two-year highs and the Bank of Japan stressed its resolve to maintain ultra-loose monetary policy, though firmer yields did little for the greenback against other currencies. The dollar gained 0.37% on the yen to as high as 115.05 per dollar following the outcome of the BOJ’s meeting, having traded as low as 114.5 earlier in the day ahead of the meeting. It then pared gains to 114.84. “The global reflation trade and rising U.S. yields are pointing ...

CFTC positioning data for the week ending 11 January shows very few changes to the aggregate dollar positioning versus reported G10 currencies (i.e. G9 excluding Sweden’s krona and Norway’s krone), which remained well into net-long territory (+13% of open interest) and only slightly below the 14% (of o.i.) recent high recorded in September. While these figures reflect the market’s speculative positioning at the start of the new year, they are still too outdated to show the unwinding of USD long positions that occurred last week and generated a fall in ...

USD: Further room to recover The week has kicked off with the release of China’s 4Q GDP and new easing measures by the PBOC. While the slowdown in growth (from 4.9% to 4.0% YoY) was not as severe as expected, the PBOC’s cut to the one-year medium term lending facility rate (from 2.95% to 2.85%) was deeper than consensus expectations. This is yet another strong signal that the central bank has fully embraced a pro-growth stance: in FX. This should – in theory – be a positive development for the ...

The dollar edged lower on Monday as traders took the view that Federal Reserve tightening moves were largely priced in, while the euro eased from Friday’s two-month high. An unexpected cut to key lending rates in China highlighted it as the outlier, with other major central banks in talks to raise rates. China’s move only briefly weighed on the yuan. The U.S. dollar index, which declined sharply last week until Friday’s leap, edged down 0.1% at 95.076 at 0900 GMT. The cash Treasury market was closed for a holiday on ...

Speculators increased their net long U.S. dollar positions in the latest week, according to calculations by Reuters and U.S. Commodity Futures Trading Commission data released on Friday. The value of the net long dollar was $19.34 billion in the week ended Jan. 11, compared with a net long of $18.87 billion the previous week. The Reuters calculation for the aggregate U.S. dollar position is derived from net positions in the yen, euro, British pound, Swiss franc, and Canadian and Australian dollars. Source: Reuters (Reporting by Karen Brettell; Editing by Leslie ...

USD: Soft Dec retail sales could see the dollar correct further The dollar has broken lower this week and on a trade-weighted basis is about 2.0/2.5% off its late November highs. The hawkish re-pricing of the Fed cycle has stalled/gone far enough for the time being – where US money market rates in 2023 are 8-10 ticks off recent highs. Extended positioning has probably made the dollar vulnerable early this year and it has weakened on any hints of softer inflation – e.g. yesterday’s US December PPI reading. But the ...

The U.S. dollar fell for a fourth consecutive day on Friday to its lowest in more than two months as investors took the view that most of the recent hawkishness from the U.S. central bank has already been priced in. On Friday, the greenback slipped 0.2% to 94.62 against a basket of currencies, its lowest since early November. On a weekly basis, it is set to weaken 1.11%, its biggest drop since December 2020. On Thursday, it fell below a 100-day moving average for the first time since June 2021. ...

The dollar fell further on Thursday to two-month lows after U.S. inflation proved weaker than feared in December, prompting investors to cut crowded long positions in the currency. The euro was a big beneficiary of the move and extended its rise to $1.1479, up 0.3% on the day, while sterling and the yen also added to their gains. December’s monthly U.S. inflation figures published on Wednesday were a fraction higher than forecast and the increase in year-on-year consumer price inflation was as expected at 7% – its biggest jump since ...

USD: Looking for a breather after major position-squaring A well-telegraphed jump in US inflation to 7% was taken as a “sell the fact” opportunity for FX investors, with a substantial unwinding of dollar longs triggering widespread dollar weakness. The technical break higher in EUR/USD likely put some extra pressure on the dollar in other crosses: whether the 1.1500 resistance holds is key for dollar bulls at the moment. We still think the dollar counter trend does not have long legs, and we see scope for a recovery by the end ...

The dollar steadied above almost two-month lows against its major peers on Wednesday, ahead of data expected to show a fresh surge in U.S inflation that could seal the case for an early rise in interest rates. Federal Reserve Chair Jerome Powell on Tuesday gave no clear indication that the Fed was in a rush to speed up plans for tightening monetary policy, putting some downward pressure on the greenback which has benefited from U.S. rate-hike expectations in recent weeks. And the currency started to nudge higher again as the ...