Here is what you need to know on Monday, September 26:
The US Dollar Index picked up where it left off last week and surged to its highest level since May 2002 114.52 before retracing a portion of its daily rally in the early European morning. Risk aversion, hawkish Fed commentary and rising US Treasury bond yields play a role in the dollar's impressive performance. The IFO sentiment survey from Germany will be featured in the European economic docket ahead of the Chicago Fed National Activity Index and Dallas Fed Manufacturing Business Index data from the US. European Central Bank (ECB) president Christine Lagarde and several FOMC policymakers will also be delivering speeches on Monday.
Ahead of the weekend, US PMI figures revealed that the service sector's business activity recovered nicely in early September. Moreover, the Composite PMI rose sharply to 49.3 from 44.6 in July and the Manufacturing PMI edged higher to 51.8 from 51.1 in the same period.
In an interview with CBS on Sunday, Atlanta Fed President Raphael Bostic reiterated that inflation is too high and that they need to do all they can to bring it down. Bostic will be speaking again on Monday. Cleveland Federal Reserve Bank President Loretta Mester and Federal Reserve Bank of Dallas President Lorie Logan are scheduled to speak later in the day as well. Meanwhile, the benchmark 10-year US Treasury bond yield is up more than 2% on the day at 3.78%.
EUR/USD lost over 300 pips last week and slumped to its weakest level since June 2002 at 0.9570 during the Asian trading hours on Monday. The pair was last seen trading deep in negative territory near 0.9630.
GBP/USD hit a new all-time low of 1.0355 in the early Asian session. The Bank of England's disappointing 50 bps hike earlier in the week and the British government's plan to lower taxes and ramp up public borrowing triggered a relentless GBP selloff ahead of the weekend. Although the pair recovered above 1.0600 in the early European morning, it's still down over 2% on a daily basis. In the meantime, there is market speculation that the BoE could conduct an emergency meeting and raise its policy rate to limit the British pound's depreciation.
Rising US yields and the broad-based dollar strength allowed USD/JPY to continue to push higher toward 144.00 on Monday. Following last week's intervention in the fx markets, "there is no change to our stance that we will respond to market moves as needed,” Japanese Finance Minister Shunichi Suzuki reiterated on Monday. The data from Japan showed that the Jibun Bank Services PMI rose to 51.9 in early September from 49.5 in August and the Manufacturing PMI edged lower to 51 from 51.5.
Gold fell below $1,630 but managed to erase a large portion of its daily losses. The precious metal seems to be staying relatively resilient against the greenback despite rising yields as it manages to capture some of the safe-haven flows. At the time of press, XAU/USD was little changed on the day at $1,639.50.
Bitcoin lost over 2% over the weekend and broke below $19,000. BTC/USD was last seen trading modestly lower on the day at $1,8730. Ethereum stays on the backfoot early Monday and loses 1% on the day slightly below $1,300.
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