The dollar index took a round trip to nowhere on Tuesday, trading steady on the day in late-U.S.
dealing as markets shrugged off weak U.S. data nL1N2LD1V6 and geared up for insights from the Fed in the upcoming session.
Unexpectedly weak U.S. retail sales and industrial production nAPN049FO9 were affected by severe weather and the timing of previous economic stimulus while Europe's drama over the AstraZeneca vaccine nS8N2JJ063 and a well-received 20-year Treasury auction added to a stew of factors investors digested as they awaited the Fed.
The euro was a standout loser in early New York trading, ceding ground to all the major currencies, particularly the yen and pound.
EUR/USD hit its lowest in four days, as concerns about the divergence between U.S. and euro zone vaccination programs persisted nL8N2LE64M and the ECB is seen keeping local interest rates and the euro under wraps via expanded PEPP purchases nL1N2L90DW.
The Fed, however, is not expected to make any major policy changes on Wednesday, thus allowing markets to lift rates if warranted by economic prospects nL1N2LE1FF, as long is that doesn't trigger disorderly financial conditions nL1N2LE1QU.
Sterling made a major recovery from London morning weakness, which got it near March correction lows and key technical supports, after Europe's medicines watchdog said the benefits of AstraZeneca's COVID-19 vaccine continue to outweigh the risks after several countries halted its use due to concerns about blood clots nL1N2LE0NE.
As AstraZeneca is Britain's second-largest company, the news also helped more than erased EUR/GBP's early gains.
An early pullback in Treasury yields with weak U.S. data gave the heavily overbought USD/JPY, and oversold yen more broadly, cause to correct those positions before the Fed.
USD/JPY selling, which was led buy a .87 yen plunge in EUR/JPY, subsided with the London close, reducing losses.
But overbought pressures persist and the vast majority of the previously unwieldy net spec IMM short has already been squeezed out nL1N2LE1DM reducing the ready fuel for further gains as prices near June's major recovery high and the 2020's pre-pandemic high at 109.85/110.30.
This may only slow the pace of the recovery if Treasury-JGB yield spreads continue to rise.
High-beta currencies were a mixed bag and mostly in consolidation awaiting the Fed, as were stocks, which saw a rotation back toward techs and away from value and industrial stocks.
There's only second-tier U.S. economic data due Wednesday, thus the focus will be on the FOMC conclusion.
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