Dollar resumes its downtrend as risk sentiment improves

Frank Walbaum

Important news this week

Wed, 21st, 08:00 CET UK Consumer Price Index.
Wed, 21st, 23:45 CET NZ Consumer Priice Index.
Fri, 23rd, various DE/EU/UK/US Purchasing Manager Index

Dollar resumes its downtrend as risk sentiment improves

The US Dollar has resumed its downside after a brief recovery, with improving risk sentiment providing additional support to risk-sensitive currencies. AUDUSD is moving higher as the combination of a softer Dollar and a more positive market mood continues to favour the Australian Dollar. The Canadian Dollar is showing even greater strength, gaining against all major peers despite weaker economic data. This suggests that current price action is being driven more by broader currency flows than by individual economic releases. The Japanese Yen is also slightly stronger against other currencies, while equities are recovering, with the S&P 500 and Dow Jones leading the gains and the Nasdaq lagging behind.

Market talk

Wednesday could prove important for the direction of markets throughout the remainder of the week. The current improvement in risk appetite offers some relief after recent pressure on equities, but the uneven performance across major indices suggests that investors remain selective. The relative weakness in technology stocks indicates that concerns surrounding the sector have not disappeared, even as broader markets move higher. In the currency market, USD weakness is providing support to several major currencies, while the Canadian Dollar stands out with broad-based gains against other peers. The Loonie's strength despite weaker economic data suggests that factors beyond domestic fundamentals are currently driving price action. For now, the focus remains on whether improving sentiment develops into a broader equity rebound and whether the renewed pressure on the US Dollar continues throughout the week.

Tendencies in the markets

Equities positive, USD weak, crypto mixed, oil sideways, metals weak, JPY stronger.

Author

Frank Walbaum

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