The U.S. dollar’s relationship with general risk sentiment has been on display of late and last night was no exception.
Overview
The U.S. dollar had lost every day for nearly two weeks as global equity markets surged. The S&P index erased all of its yearly losses yesterday and the greenback hit multi-month lows versus many rivals. However, the dollar is on the front foot this morning as global equities have sold-off, perhaps as traders start to believe that the bullish run is overdone. The Bloomberg Dollar Index is up 0.3% this morning after falling 2.5% over the past eight sessions.
The safe-haven Japanese yen experienced a similar reaction.
There is no major data on today’s docket so traders will solely focus on risk before shifting attention to tomorrow’s Federal Reserve policy decision.
What to Watch Today…
- No major events scheduled for today.
Complete Economic Calendar can be found here.
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AUD
The Australian dollar was the biggest loser overnight, falling over 1% against the U.S. dollar. The Aussie has been one of the main beneficiaries of the strong rebound in risk sentiment after falling to historic lows in March. AUD/USD fell as much as 14% in a week in early March. Since then the currency rallied 22% and touched its strongest level in a year. But AUD/USD will remain susceptible to pull back in global equities.
GBP
The British pound fell for the first time in nine days on general dollar strength as risk appetite fell off. Brexit remains a major hurdle for Britain and the strength of the pound. The U.K. will begin trade talks with Japan today, which many see as a contingency plan for the United Kingdom if they exit from the EU by the end of the year.
The economic docket showed a decent rebound in retail sales which rose to -5.9% in May from -19.1 in April. The U.K. government is in active talks to ease restrictions as COVID stats are improving which means that next retail sales data may be back in the green.
