Dollar Drops as Traders Focus on Geopolitics, Fed
The dollar reversed its Asia-session gains as risk sentiment improved following the Tokyo fix, with oil prices losing traction and equities rebounding.
The Bloomberg Dollar Spot Index drops as much as 0.2% while hostilities between Israel and Iran showed no signs of abating
G-10 spot volumes run at around 80% of recent averages as the week kicks off, with sizable demand from hedge funds going through for the euro after the London open, Europe-based traders say
The 50th annual G-7 leaders summit in Canada, as well as major central bank meetings, including the Fed, the BOE and the BOJ are in focus this week
Still, front-end vols trade in the red, reflecting a market that appears unwilling to hedge tail-risk scenarios or face theta decay amid the conflict in the Middle East
The Antipodeans climbed on short-covering, according to an Asia-based FX trader; AUD/USD up 0.5% to 0.6516 versus 0.6467 day low
USD/JPY pares a 0.5% advance to trade modestly higher at 144.19 ahead of Tuesday’s BOJ decision; policymakers are expected to keep interest rates on hold, with more focus on its future bond buying plans
One-day implied vol rises as much as 952bps to 17.36%, heads for its biggest advance since November
EUR/USD rises 0.3% to 1.1581; take-profit offers seen at 1.1600-20: trader
EUR/GBP up 0.2% to 0.8527; it is up a sixth day, the longest winning streak in three months
The ECB must retain full optionality on interest rates because uncertainty over the growth and inflation outlook remains elevated, according to Governing Council member Joachim Nagel
The BOE is facing pressure to push ahead with more interest rate cuts after a week of woeful data showed the UK economy and labor market buckling under the weight of tax increases and US President Donald Trump’s trade war
Source : Bloomberg
