The dollar tumbled to two-year lows as geopolitical and U.S. coronavirus fears increased the likelihood that the Fed would have no choice but to sound accommodative after its meeting this week.
The euro, recently boosted by the EU's mutualized relief plan, competed with high-beta, emerging market and other major currencies in beating down the dollar.
EUR/USD neared its September 2018 high and 61.8% Fibo of the 2018-20 drop at 1.1815/22, as well as the downtrend line from 2008 just beyond.
IFO beat forecast nS8N2EO00Y, but so, too, did the less timely U.S. durable goods orders nAPN0FYWGO.
Dollar selling was driven by suspicions that the Fed could keep rates near zero for longer than earlier thought to fight the economic effects of expanding COVID-19 outbreaks and help the Treasury cheaply finance trillions of dollars worth of crisis debt.
Though COVID-19 flare-ups broadened globally, most major economies have suffered less drastic infection rates than the U.S. recent weeks nL3N2EY1K6.
Tensions with China also weighed on the dollar nL3N2EY1K6 as well as concerns about the next U.S. pandemic relief bill nL3N2EY1K6.
But the overriding macro theme remained riskier assets receiving support from historical fiscal and monetary stimulus and dollar selling to fund such trades.
With Treasury-Bund yields spreads over the broader Fed and ECB policy horizons diminishing to levels last seen when the dollar was 15% lower than currently, the U.S. currency's safe-haven and carry allure is greatly reduced nL2N2EY0ZE.
The yen has reclaimed the top-haven title, with USD/JPY nearing 105 and probing the 61.8% Fibo of the mid-March pandemic recovery at 105.20.
Despite scope for a corrective bounce, longer-term techs and targets at 104.10/12 appear within reach ahead of the 101.18 coronavirus spike low nL2N2EY0RG.
GBP/USD is riding the dollar’s slide toward March’s 1.3200 pre-pandemic plunge peak.
Emblematic of Fed-led stimulus damaging the dollar and lifting most asset prices were gold's rise to record highs, a 7%+ surge in silver, higher oil, copper and stocks, with ZAR, MXN and BRL top currency gainers.
Treasury yields ticked up slightly into this week’s compressed Treasury auction schedule ahead of the FOMC meeting end on Wednesday.
With no major Fed policy announcements expected this week, markets will scrutinize the FOMC's tone and congressional efforts to extend fiscal supports by the month-end deadline for some of pandemic relief programs.
and euro zone Q2 GDP reports are due on Thursday and Friday and U.S. corporate earnings reports remain in focus.
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