The USD is Firm, Rally versus Euro, JPY
Comments from Federal Reserve Governors like Harker, Brainard, and Clarida, and successful bond auctions all merged to support rising bond yields, a factor that's supportive of the greenback. That interest rates will be kept lower for longer, and expectation of more debt fuse to back the bond market bonds will naturally rise, attracting capital denominated in USD. Brainard, a dove, also said if there is a need, the Federal Reserve will increase bond purchases. On the other hand, Clarida said even if rates are raised, it would be done to a neutral policy stance. This is subject to inflation rising to one or two percent. Once this happens, the FED may consider tightening.
The overall chorus is dovish. This is, nonetheless, not preventing the USD rally. The USDX is up but remains within the critical 90 to 91 zone. Ideally, a close above this will stretch gains versus GBP—the remains resilient to USD's resurgence, briefly gains, CAD, AUD, NZD, and CHF. Specifically, commodity currencies—AUD and NZD, reversed sharply, halting their march. This week, the EUR/USD may extend losses following news from the ECB. Euro's failure to clear major hurdles will prop USD bulls, keen on pressing higher, reversing their steep losses of last year.
Impact on the USD:
Bullish. Monetary policymakers are dovish, but deteriorating macroeconomic conditions and general confidence in the global economy support the USD in the short-term. A reprise of the USDX above 91 would see the greenback receive a boost, gaining versus Euro and other majors as a result.
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