US yields lift dollar
The FOMC minutes “balanced risk” comments were enough to move US yields slightly higher overnight, which also lifted the US dollar. The committee felt that risks were balanced but that the economy remained far from the FOMC’s longer-term goals. Additionally, they expressed comfort that the recent rise in US bond yields reflected an improving economy and economic outlook. Once again, they emphasised that labour markets remain far from pre-Covid levels and seemingly, this forms the centre of FOMC thoughts and rightly so.
The dollar index climbed 0.13% to 92.43 in a forgettable session with gains limited as the euro held its gains from the previous day. Currency markets continue to range trade and are being dominated by tail-chasing fast money flows in a week where direction from hard data has been minimal. Both the Australian and New Zealand dollars fell overnight by 0.70% on no particular information.
EUR/USD remains unchanged at 1.1870 today, with the single currency holding its previous day gains, likely boosted by EUR/GBP buying. Sterling fell after British authorities recommended that the AstraZeneca shot not be used on under-30’s, and the EMA noted blood clot risks. Sterling fell 0.63% to 1.3740 overnight, recovering some of those losses to 1.3760 in Asia. GBP/USD has once again rallied and failed at channel resistance, today at 1.3900, suggesting that a retest of 1.3680 is on the cards, particularly if doubts arise over Britain’s vaccination pace.
The Indian rupee plummeted yesterday after the Reserve Bank of India announced a bond-buying programme for this quarter, and India’s Covid-19 woes deepened. USD/INR rose by 1.30% to 74.450, taking out its 200-day moving average at 73.660 and its one-year resistance line at 73.944 in the process. These are bearish technical developments, and with things set to get worse before they get better in India, USD/INR looks set to test 75.000 in the days ahead potentially.