The US Dollar (USD) is flat to slightly softer on the session but retains a weak undertone overall, Scotiabank’s Chief FX Strategist Shaun Osborne notes.
“FX movement is mostly limited as markets mark time ahead of today’s data releases and the FOMC on Wednesday. European stocks and US equity futures are firmer, with tech leading moderate gains, while bonds are slightly firmer. US Retail Sales data this morning are expected to decline 0.2% in April, weighed down by soft auto sales (ex-autos data is expected to be up 0.2%). August Industrial Production is forecast to rise 0.2% after July’s drop but sluggish PMI/ISM data suggest some risk of soft data.”
“Business Inventories and the NAHB Housing market Index are out at 10ET but are unlikely to be market moving. Soft Retail and IP data may weigh on the USD tone as markets continue to mull the likely scale of Fed easing. Swaps are pricing in 38bps of easing risk for Wednesday, leaning slightly in favour of a more aggressive cut but still somewhat equivocal pricing means that the outcome Wednesday will disappoint some sections of the market and will likely boost volatility in the short run at least.”
“The DXY retains a weak undertone on the charts, with the index pinned back against the recent range lows at 100.50/60. Technical trends and underlying momentum indicators are tilted bearish, suggesting more losses ahead for the index. DXY spread-based fair value is estimated at 99.6 this morning.”
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