USD Drifts as Consolidation Extends – Scotiabank

The USD continues to drift as it consolidates last week’s advance, Scotiabank’s Chief FX Strategist Shaun Osborne notes.  

USD continues to consolidate

“Gains for the JPY and EUR on the session are pressuring the DXY somewhat but the drop in the dollar index still looks more like a pause ahead of renewed gains rather than a reversal. High beta FX is mostly underperforming amid some lumpy moves in Asian stocks and a sharp drop in crude oil (down 2%). The AUD is the main underperformer on the session as markets ponder the outlook for the Chinese economy.”

“Chinese markets returned from holidays with a bang but were unable to sustain strong opening gains. Investors are disappointed with the scale and scope of stimulus measures offered by the authorities. The mainland CSI 300 stock index gave up nearly half of its opening gains on the day while the Hang Seng fell more than 9%. European stocks are in the red while US equity futures are holding small gains.”

“It’s another pretty light session for data—just the Trade Balance update from the US this morning. There is a bit more Fedspeak today (Bostic, Collins—a non-voter—and Jefferson) and a 3Y auction, with results at 1pm. This evening, the RBNZ is expected to cut its key cash rate 50bps to 4.75%.”