USD Moves as Consolidation Extends – Scotiabank

The USD continues to move as it consolidates last week’s advance, notes Shaun Osborne, chief FX strategist at Scotiabank.

USD continues to strengthen

“Gains for JPY and EUR on the session put some pressure on the DXY, but the decline in the dollar index shows a pause before renewed gains rather than a reversal. High-beta FX has largely underperformed amid crowded moves in Asian equities and a sharp decline in crude oil (down 2%). AUD is the main underperformer of the session as markets weigh in on the outlook for the Chinese economy.”

“Chinese markets returned from the holidays with a bang, but were unable to sustain strong opening gains. Investors are disappointed by the scale and scope of the stimulus measures offered by the authorities. The mainland CSI 300 stock index gave up nearly half of its opening gains on the day, while the Hang Seng fell more than 9 percent. European stocks are in the red, while US stock futures hold small gains.”

“It’s another fairly light session for data – just the US Trade Balance update this morning. There’s a bit more Fedspeak today (Bostic, Collins—a non-voter—and Jefferson) and a 3-year auction with results at 1 p.m. Tonight, the RBNZ is expected to cut its key cash rate by 50bps to 4.75%.