The US Dollar (USD) is narrowly mixed to a little firmer against the majors in quiet trade. It’s another very light session for data, Scotiabank’s Chief FX Strategist Shaun Osborne notes.
USD mixed to firmer in quiet trade as markets await CPI
“Markets have little incentive to move significantly ahead of tomorrow’s major event risk in North America—US CPI data and the BoC policy decision. The GBP and MXN are grinding out small gains on the USD so far on the session while the AUD has given up yesterday’s China stimulus-driven bump to slide more than 0.6%, pulling the NZD lower with it.”
“The RBA policy meeting overnight concluded with no change in the policy rate, as expected, but policymakers indicated that they are gaining confidence in the inflation outlook which prompted markets to boost expectations that a rate cut could, finally, emerge in February. Global stock trends look a little soft again after yesterday’s US market losses when the Santa rally appeared to stumble a bit. The S&P 500 is up more than 30% this year so a correction ought not surprise.”
“The charts suggest that the stock rally may be starting to look a bit stretched and might be losing momentum. Soft stocks may have given the USD a bit of a lift in European trade but the roots of the dollar gains seen in the past few days really lie in the strong rebound seen around Friday’s jobs data. In contrast to the ‘seasonal’ soft trend in the USD that we often see in December, near-term risks appear geared towards a bit more strength in the DXY towards 106.75. Support is 106.00/05.”
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