The dollar index rose modestly on Monday, led by USD/JPY gains and setbacks in EUR/USD and sterling from new trend highs earlier in the session after running into major chart resistance, as Treasury yields rose versus bund, gilts and particularly against falling JGB yields.
With limited economic data and much of Asia out for the Lunar New Year holiday, trading was cautious and consolidative, particularly after EUR/USD's new trend high at 1.0927 on EBS attracted sellers ahead of the 50% Fibo of 2022's collapse at 1.0938 and sterling's new trend high at 1.24475 barely breached December's 1.2446 peak by the 61.8% Fibo of 2022's tumble.
The haven dollar was mostly lower earlier in the day amid risk-on flows linked to China reopening hopes -- which Europe and commodity exporters are seen benefiting more from than the U.S. -- and expectations U.S. inflation and growth will wane enough to prevent Fed rates rising above 5% before easing in H2.
But 2-year Treasury yields rose 5.5bp versus a 2bp rise in 2-year bunds and a marginal drop in gilts yields.
With the Fed meeting end on Feb.
1 and the ECB and BoE announcements on Feb.
2, the market will be looking for data to refine its policy expectations.
This week's most important U.S. data are due out on Thursday and Friday, with particularly interest in Q4 GDP, jobless claims and the Fed's core PCE inflation gauge nL1N3481EN.
Global PMIs on Tuesday will set the mood.
EUR/USD rose 0.1% and GBP/USD fell 0.13%, with pending risk of a double-top in the pound.
USD/JPY rose 0.8% toward important resistance as JGB yields fell further below the BoJ's 50bp 10-year yield caps amid the squeeze on JGB shorts taken before the Jan.
17-18 BOJ meeting, which expanded, rather reduced, policy accommodation many were anticipating nL1N34817C.
The risk and China-linked Australian dollar rose 0.9% as S&Ps made new 2023 highs on U.S. soft-landing hopes, with major earnings reports eyed this week.
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