- USD lost ground against major currencies on Monday
- US Dollar Index dropped to 94.6
- All eyes will be on Jerome Powell’s testimony before Congress today
The USD lost ground yesterday after notching up its largest weekly increase in a month over the last week. This came after stronger risk appetite encouraged investors to move away from long dollar bets to a more diversified portfolio.
Outstanding USD bets nevertheless remain at their highest levels in nearly 18 months, with the most recent weekly data indicating even higher positions after escalating fears about global trade and strong US economic results further increased demand for the currency.
Portfolio Concepts Manager, Constantin Bolz, said: “What we are seeing now is some sort of a reversal in that trend as European economic data have shown some improvement while the US economy is displaying classic symptoms of a late-cycle.”
After surging 0.7% last week, the US Dollar Index dropped by 0.2% to 94.6 yesterday.
The USD’s increasing reverse correlation with international risk appetite has propelled the currency nearly 6% higher over the last quarter. Yesterday’s surge in European shares appears to have broken that trend.
With international risk appetite recovering yesterday despite poor Chinese economic results, fears about the growing trade conflict between China and Russia subsided, boosting high-yield currencies.
The Swedish crown strengthened by 0.5% to 8.8330 crowns per USD, despite slower home price growth.
The EUD/USD traded at $1.1703 (+0.2%) after dropping by 0.5% last week.
The AUD/USD traded at 0.7433 (+0.2%) amid lower volumes because of the Japanese public holiday on Monday.
As far as economic data is concerned, US Federal Reserve Chairperson Jerome Powell will give his half-yearly testimony on monetary and economic policy to the Senate Banking Committee today. This will be closely watched by forex markets.