The dollar slipped slightly on Monday, erasing earlier gains after a big miss and downward revisions to industrial production nL1N2RE14M trimmed Treasury yield gains.
The halt in rising yields also attracted dip buyers in stocks, undermining the safe haven attraction of the dollar, which entered Monday's session riding high on accelerated Fed tapering and rate hike pricing following Friday's strong U.S. retail sales report.
EUR/USD was up 0.13% in late U.S. trade boosted after it found buyers by the session low of 1.1572 on EBS, near the 10-day moving average, either covering shorts following the 1.1909-1.1522 September-October slide or to get long.
Longs will want to see a close above the 21-day moving average, last at 1.1626, to signal a bigger rebound nL1N2RE1DM ahead of the Oct.
28 ECB meeting.
New Zealand's upward inflation surprise nL1N2RD0GE and hawkish comments from Bank of England Governor Andrew Bailey nL1N2RD07B had sent rates roaring in Europe and the U.S., regardless of fresh signs China's economy is stumbling nL1N2RE03R.
Though ECB officials have tamped down market expectations of euro zone rate hikes, 2-year Bund yields surged 6.4bp to their highest since June, and nearly 13bp of ECB rate hikes were priced in by December 2022.
That potential tightening paled in comparison to the 118bp of BOE rate hikes and 47bp of Fed hikes priced in by next December, though the immediate effect of the soft U.S. data tamed much of this dynamic in the U.S. session.
GBP/USD fell in the face of increasingly aggressive BOE rate hike pricing, that is potentially preempting how much tightening the bank will do if supply and labor constraints ease by late 2022 nL1N2RE180.
Positioning by traders likely had more to do with the GBP/USD's pullback after Friday's high ran into the thin daily cloud cover and the upper 21-day Bolli after a rapid 1.3412 to 1.3773 recovery from late September's lows to Friday's high.
USD/JPY fell 0.04%, off its early Monday high of 114.45 by Friday's 114.47 trend high, and major hurdles at 114.50-55 nL1N2RE1H0.
Monday's 114.02 low shows how shallow dips have been this month, as 5-year Treasury-JGB yield spreads hit their highest since February 2020.
And as long as dips in stocks keep attracting buyers, despite somewhat higher risk-free yields, demand for the yen as a haven will be limited and a breakout past major resistance at 114.55 remains the risk.
AUD/USD recovered most of its early losses tied to weak Chinese data and risk-off flows.
It was also weighed down by losses against the kiwi after RBNZ rate hike pricing increased on the high Q3 CPI nL1N2RD0GE.
Bitcoin was marginally higher and near 6-month highs, still being favored as a potential inflation hedge and in anticipation of the first futures-based bitcoin ETF nL1N2RE0AK.
Ether pulled back slightly, amid some potential warning signs a correction may be brewing nL1N2RE1V7.
The U.S. data calendar is light until Thursday's claims, Philly Fed and existing home sales, the latter after Monday's strong NAHB report nN9N2NL02K.
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