Dollar Rally Extends – USDJPY 113.00 in View

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Market Drivers September 27, 2017
Dollar Rally Extends
UK CBI shows sales at fastest pace in 6 months
Nikkei -0.31% Dax 0.52%
Oil $52/bbl
Gold $1289/oz.

Europe and Asia:
CBI Distrubutrive trades 42 vs. 5

North America:
Durable Goods 8:30

The dollar continued to grind higher in Asian and early European trade but was turned away at the 113.00 level in its first attempt to break the figure.

Aided by modestly hawkish remarks from Janet Yellen yesterday in Cleveland, the buck remained well bid in today in generally quiet news free trade. Ms. Yellen reaffirmed the Fed’s commitment to another rate hike in December but at the same time acknowledged that the pace of inflation has been surprisingly weak suggesting that the fed terminal interest rate target may need to come down.

Still, Ms. Yellen maintained the view that some policy tightening was appropriate helping to keep the dollar bid in yesterday’s trade which extended the flows in overnight dealing.

With only Durable Goods on the economic calendar, newsflow will once again be minimal today, but the market may focus on President Trump’s proposed tax package as well as equity and fixed income flows. With the end of the month upon us, FX could be subject to some rebalancing flows which could help squeeze the dollar higher.

Generally, sentiment towards the buck has improved markedly this week as troubles in Germany, unresolved elections in New Zealand and Ms. Yellen consistently hawkish message have provided steady support for the unit. Barring any exogenous geo-political shocks the rally in the dollar should extend with USDJPY probing the 113.00 figure while EURUSD could drift towards 1.1700.

Boris Schlossberg
Managing Director

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