USD Takes A Pause But Still Set For Best Monthly Performance In A Decade

Heading into today’s European trading session, the risk tone is leaning risk-on. Asia-Pacific indices are positive across the board; volatility measures are subdued, and safe-havens mixed.

Leading Asia-Pacific indices to the upside is the Hang Seng at +3.21%, followed by the CSI 300 at +2.37%, the Topix at +2.09% and the Nikkei 225 and ASX 200 at +1.75% and +1.06%, respectively.

In the FX complex, it’s AUD leading to the upside, supported by the positive risk tone and strength in commodity prices. NZD and CAD are also firmer on the session, albeit to lesser extents.

In contrast, it’s USD leading to the downside as the reserve currency takes a break from its recent rally. Nevertheless, the greenback is still on track for its best monthly performance in a decade, supported by hawkish FOMC expectations and a growing contrast in economic performance with the other major currencies.

Looking ahead, today’s focus will turn to inflation, with the release of European CPI in today’s European session and US PCE data in the following US session. Of course, this week’s dominant themes surround the global economy and monetary policy outlooks will still remain influential, alongside position squaring into the weekend.