USD ascent may slow

USD continued its ascent from its lows at the start of May.

US Dollar
Source: Bloomberg

The dollar index managed to break above the 94 level, which covered back the sharp fall seen at the end of last month.

The upward momentum seems to be strong but the key test will be at around 95, where the dollar had previously attempted for an upside break twice in April. According to the CFTC, speculative short positioning against the USD appeared to be reducing. Verbal intervention from Japan may also help to increase the net USD buying against the JPY. The pullback in AUD against the USD would also contribute.

Nonetheless, USD bulls may not be able to rely on market news to drive the greenback higher. A couple of Fed policymakers have reduced risks that hawkish comments from non-voters Williams and Lockhart, and probably Dudley, is representative of the FOMC.

Non-voter Kashkari said the Fed will stay on the data-dependent path. With that said, should we see a fresh batch of upbeat US data, particularly in inflation numbers, the higher odds for an early second half rate hike cannot be ruled out.

Meanwhile, mixed leads from the overnight session, and sharp pullback in oil prices have affected risk appetite. Asia has started on a cautious tone, with most regional indices trading without a clear direction.

Straits Times index began on a bearish mood, quickly paring back yesterday’s gains. China released its April inflation figures this morning, with CPI coming in on target at +2.3% YoY, while PPI was better than expected, contracting -3.4% YoY versus -3.7% estimated.

 

Yesterday: S&P 500 +0.1%; DJIA -0.2%; DAX +1.1%; FTSE -0.2%

 

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