Dudley Do-Right for the dollar bulls

In the absence of any meaningful economic data overnight, the market’s focus was on Fed member Dudley who bolstered the case for Fed policy normalisation. Hitting the right chords and sounding dismissive about the recent slowdown in inflation,  an unrepentantly hawkish Dudley provided the USD bulls with enough fodder to re-engage dollar longs tentatively. DXY moved back towards last week’s highs as  US 10y yields  based and pivoted  higher throughout the NY session, and Gold predictably  pointed lower on the stronger USD

Risk sentiment held well as NDX  was the big gainer closing at  +1.6 % as buyers resurfaced after selling dominated for the expiry on Friday.

US Dollar

After a somewhat sluggish start to the week, Fed Dudley views on inflation confirmed a unified Fed willing to look through the soft Q1 inflation print,  provided a spark to the dollar bulls.  But given that Dudley’s public edict is almost always fully in sync with that of Yellen, anything other would have been the shocker. While the markets remain dollar bid tentatively, there remains an air of uncertainty on this move as the USD reality check is likely only one bad US economic data print away.

Japanese Yen

USDJPY continues rallying in early APAC trade after Fed member Dudley comments struck a chord with investors Even Russia’s threat to target US warplanes in Syrian airspace failed to ruffle sentiment or cause any risk averse demand for JPY. Given the markets are  still  short USD, the headlines are likely to  create a bit of discomfort as the short term momentum is tentatively USD bullish as a  unified Fed is  steers the policy  ship

British Pound

The market remains wrapped around the on-going Brexit negotiations. There remain many obstacles and hurdles for the UK economy, and the initiation of the negotiations will be substantial, but the general tone at this stage is what’s key.