The dollar index rose on Monday, buoyed by weak China data and lockdowns, which hinted at slower global growth in the near-term, and a further rise in Treasury yields and short-term rates.
The U.S. benchmark 10-year Treasury yield hit 3% for the first time since December 2018 and Eurodollar interest rate futures fell, enhancing the dollar's appeal, particularly against currencies of countries whose central banks are not expected to keep pace with the Fed.
EUR/USD fell 0.46%, ending NorAm a shade below 1.05.
The euro found support just ahead of 2022’s low at 1.0470 put in on April 28.
Despite expectations of rising euro zone rates in 2022, the ECB’s normalization path is significantly slower than the Fed’s, which should keep EUR/USD from making any serious moves higher.
Euribor futures were indicating +91bps in hikes by the December 2022 ECB meeting, whereas the Fed is expected to hike rates 248bps by year-end.
USD/JPY backed away from recent lows by 129.30, put in after making a new 2022 high by 131.25 on April 28.
With Fed expectations for a 50bp hike on Wednesday and near 75bps at the June 2022 meeting, the low-rate yen, which futures see remaining steady into year-end 2022, is expected to remain weak, barring bouts of intermittent profit taking as entrenched longs take profits after the move higher from early 2022 lows by 115.
GBP/USD remains severely dominated by the hawkish Fed even though the BoE is well along its normalization path and expected to hike rates 25bps at Thursday’s MPC meeting.
The BoE’s slower and lower hike path is setting up GBP/USD traders for a further test of the 2022 low by 1.2412.
Early crypto gains reversed into the NorAm close.
The weak China data over the weekend had some traders rethink hawkish global rate tones amid reduced commodity prices.
However, the drift lower in U.S. interest rate futures kept hawkish Fed vibe intact, weighing on BTC and ETH.
A dip below $37k in BTC would open the way for a test of late-February lows by $34.3k and Jan.
24 lows by $33k.
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