US Open Note – Dollar ticks green as markets eye central banks this week



Dollar demand weighs on major peers; US yields assist

It appears markets have already forgotten Friday’s disappointing data regarding new jobs created. The somewhat upbeat market mood has lifted the US 10-year yield to 1.3664% and aided the greenback in its comeback today. The dollar index is pushing higher, currently at 92.40 and its renewed strength is reverberating across the forex arena in major pairs.

The euro is at $1.1846, the pound is at $1.3770 and the USD/JPY pair has pushed above the 110.00 mark. The German ZEW indicator of economic sentiment signalled a softened picture in the Eurozone. The gauge fell for a 4th consecutive month coming in at 26.5, while the survey for the Eurozone weakened to 31.1. However, final GDP was up 2.2% q/q and employment change improved to 0.7% in the second quarter of 2021. Nonetheless, it is unlikely the ECB will surprise the market in its policy meeting this week, however, doubts around when the ECB is considering tapering its asset purchases may also be adding to the euro’s slight lagging today.

Weaker data for the UK in terms of the BRC retail sales at 1.5% y/y and the Halifax HPI at 0.7% m/m may have been overshadowed by the pound’s selloff today to $1.3768, which could be connected to comments by BoE policymaker Michael Saunders who stated that the UK does not need as much stimulus as before.

Metals slip and oil steadies

Gold plunged to $1,809/oz and is heading for the $1,800/oz mark, while silver dropped to $24.20/oz. WTI oil futures dipped to an intraday low of $68.17 per barrel.

The Canadian dollar took a whack today with the USDCAD pair rising to C$1.2592 aided by some strength in the greenback. The Canadian economy is doing well and the country’s inoculation program is progressing with a jobs report scheduled on Friday. Furthermore, the Bank of Canada was among the first to lower its asset purchases, but it is unlikely the BoC will surprise markets at tomorrow’s meeting, especially as a nearby election looms. The currency may trade between C$1.2500 and C$1.2600 heading towards election day, assuming the BoC does not surprise markets tomorrow.

The recovery in Australia has been interrupted by lockdowns due to the Delta outbreak, which has hampered activity. Down under, the Delta variant is expected to delay the recovery as it has caused the flexible RBA to adopt a dovish stance, despite cutting asset purchases to $4Bln a week and extending QE purchases until February 2022.

Later today Japan’s final GDP and current account figures are due at 23:50 GMT

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