Forex News: Dollar (DXY) Weakens Over Spending Concerns

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The Dollar was weaker in N.Y. on Thursday, taking the DXY to one-week lows of 91.38 from early highs of 91.80. Better than expected initial and continuing jobless claims provided a brief boost to the Greenback early in the session, though despite slightly higher Treasury yields, the USD then turned broadly lower. Surging yields over the past couple of weeks had supported the Dollar, though as the bond market has largely this week steadied, the yield driver appears to have stalled, as inflation concerns have ebbed some following Wednesday’s benign PPI outcome. Another sharp rally on Wall Street may have dented the USD safe-haven sentiment, while some concerns over the amount of U.S. deficit spending may be starting to take a toll on the Greenback.

EUR-USD was held to a 1.1990 to 1.1928 trading band since the ECB announcement. Euro downside was limited despite higher Treasury rates, and lower EGB yields, which followed the Bank’s announcement that it would significantly step up monthly asset purchases. Another day of sharp equity gains in the U.S. may have dented safe-haven USD sentiment, while the passage of the $1.9 tln “rescue” package, helpful for stocks, may have begun to hurt the Dollar, as there seems to be no end to deficit spending.

Cable rallied from 1.3939 lows seen early in the session to 1.3986 into the London close, marking six-session highs in the process, and trading above its 20-day moving average for the first time in a week. The U.K.’s impressive vaccine deployment should continue to bode well for Sterling, as economic recovery should occur at a faster pace than most other countries.

USD-JPY got a bit of a boost early in the session following the better U.S. jobless claims figures. The pairing headed from 108.44 lows to 108.71 by mid-morning. Since then, general USD softness has seen a return to 108.42 lows. Risk-on appears to have weighed on the Dollar again on Thursday, though USD-JPY will likely remain sensitive to Treasury yields, which are likely to remain firm on growth and inflation expectations. JGP rates meanwhile, remain hemmed in by BoJ yield curve controls. Wednesday’s 108.33 low marks support now, with resistance at yesterday’s 108.92 peak.

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USD-CAD headed to two-week low of 1.2570 into the North American open, down from 1.2625 highs printed after Wednesday’s close. The pairing has since rallied back to 1.2608 highs, as the USD overall edged higher following improved jobless claims, and as oil prices moved down from session highs. Later, as the USD came under broad pressure, and as WTI crude reclaimed the $66 handle, USD-CAD fell to 1.2538. The 20-day moving average at 1.2643 now marks resistance, with support at 1.2468.

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