USD Strength Amidst EURUSD Bearish Signals

The recent actions of the Federal Reserve, coupled with softer-than-expected US survey data and Friday’s underwhelming payroll figures, triggered a notable shift in US rates and the USD. Initially leaning towards potential rate hikes, market sentiments pivoted towards a more dovish stance, prompting a re-evaluation of USD positions.

The USD weakens despite holiday-thinned trading, prompting cautious optimism among traders. However, the broader trend favours a stronger dollar over the long term.

USDJPY Intervention and US Data Releases

While USDJPY intervention played a role, it was primarily US data releases that influenced the downward trajectory. Notably, USD selling at week’s end was largely a trimming of positions rather than a significant shift to shorting, with only demand for BRL standing out in this regard.

Global Focus on US Policy

Japan’s actions underscore the global focus on US policy, with many policymakers adjusting their strategies based on Fed decisions. Moreover, the People’s Bank of China’s recent adjustments to the USDCNY fix suggest a potential shift, contributing to stabilization in USD/NJA pairs. Macro interest in buying USDCNH topsides remains robust across various maturities.

Upcoming US Data and Fed Speakers

Looking ahead, the US data calendar is light, placing Fed speakers in the spotlight. Meanwhile, the Bank of England’s communication on Thursday will be closely scrutinized for clues about potential policy shifts. Changes in inflation projections, voting splits, and Governor Bailey’s tone during the press conference will provide insights into future rate decisions.

Central Bank Meetings in Emerging Markets

In the emerging market space, central bank meetings in CEEMEA and Latam, particularly in Brazil and Peru, will be monitored for potential policy adjustments.

Conclusion

While the USD has shown signs of weakness, the broader trend suggests a stronger dollar over the long term. The global focus on US policy, coupled with upcoming data releases and central bank meetings, will provide further insights into the future trajectory of the USD.