With economic fundamentals good and yields finally range-bound, the USD is moving lower against all G10 and most EM FX with the funders (JPY and CHF) leading the way. Technicals are also weighing. The Bloomberg broad USD index has now crossed below the 50-day and 100-day moving averages and has retraced 61.8% (4th Fibonacci level).
Notably droopy, USD is dittoing the downward squeeze on Treasury yields, rather than a clear signal from risk appetite. Equity markets are close to flat, as things are about to heat up in the US earnings season.
EUR/USD decisively punched through 1.20 in London, essentially a function of a weaker USD, although some vaccine news provided an updraft. GBP strength mirrors USD weakness with encouraging UK economic data suggesting sterling can keep pace with the rest of G10 for now, especially with UK lockdowns easing.
The CAD is the worst performing G10 currency so far in April and getting compounded by today’s Budget 2021 announcement.
Oil is starting the week on a somber note as rising COVID-19 cases in Asia (India especially) led to a record number of global infections last week and caused concerns about a possible slowing of the global economic recovery. WTI and Brent are unchanged today, lagging the boost from the lower USD that is benefitting base metals today.
Continuing talks in Vienna between Iran and other world powers has been described as constructive, with some expecting the US and Iran will eventually return to a nuclear deal potentially within weeks.
On the supply side, a fifth weekly increase in the US rig count should not come as a significant surprise given high oil prices, but may still mean some pressure on the oil price.