Forex today: Dollar makes a score through the 97 handle as traders return to weigh up the week ahead

There was a sense of optimism in the markets, despite the risks in the G20 summit, Brexit, the price of oil down some 25% and US indexes below 2017 closing levels. 

There was a little for everyone from the mixed performances on Monday across equity, commodities and in the FX space with a lack of direction or commitment from either bears nor the bulls. However, Asia's improved equity mood continued in Europe and US trade. ECB's Draghi remained optimistic about Eurozone growth and inflation and Italy rallied on budget hopes, as analysts at Westpac noted. However, Draghi was also noting the deteriorating economic performance of the eurozone and global trade alliances and was not particularly convincing with respect to cemented timings of a taper, although slated December remains likely. 

Meanwhile, the dollar was making a steady climb in North America as favoured amongst a bad bunch considering the wealth of overseas negative factors and uncertainty. The DXY managed a score back onto the 97 handle while the US 10yr treasury yield climbed from 3.05% to 3.09%, and the 2yr yields morphed into a slightly lower range of 2.82%-2.84%. As far as Fed sentiment went, ahead of a number of key Fed speakers for the week ahead, including Powell on Wednesday, the Fed fund futures repriced the chance of the next rate hike on 19 December at 80% (from 75%).

Currency action

Analysts at Westpac offered a wrap of the action from currencies overnight: "EUR/USD round-tripped from 1.1330 to 1.1385 and back. ECB speakers, notably Chief Economist Praet and President Draghi, noted the moderation in recent data had been deeper than expected and that uncertainties such as protectionism had risen. Nevertheless, they maintained their view that the economy was still in line with their projections and their bond purchases are set to end in December. However, the moderation means that the ECB will maintain significant monetary stimulus."

"NZD/USD similarly traced 0.6780 to 0.6815 and back. AUD/NZD slipped from 1.0685 to 1.0655, despite the improved risk sentiment."

"AUD/USD followed the broad USD swings, rallying from 0.7230 in the Sydney afternoon to around 0.7275 in the London morning, then back to 0.7230 by early Sydney trade Tuesday. There was no apparent correlation with the ongoing slide in iron ore prices, with the benchmark spot price in China printing -6.8% at $64.45/tonne, a low since July and Dalian futures settling -2.1%."

"USD/JPY, however, found clear direction, rising from 112.90 in the Sydney morning to 113.60 late NY, supported by the rise in equity markets and US bond yields."

Key events from US session:

• Wall Street stages strong recovery on oil rebound, trade optimism

There are no key events slated for Asia today.