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USD strength pointing towards improving global sentiment – SocGen

FXStreet (Delhi) – Kit Juckes, Research Analyst at Societe Generale, suggests that weakness in Asian/European equities yesterday morning was followed by a US rally, and that in turn took Treasury yields back up and dollar’s status as a funding currency or as a safe-haven currency for that matter is lost. Instead, it’s a barometer of the global mood which, is improving (today, at least).

Key Quotes

“The trouble is that the more the mood is positive, the more noise the FOMC hawks will make and the better the chance of a 2015 rate hike. At the moment, significant further dollar strength is dependent on both longer-dated US yields and equities rising. That’s possible on a quiet day like today, but if we get back to more risk-averse markets, the dollar is unlikely to out-perform the yen and Euro, even as all three do well against everything else.”

“The most visible loser as the better risk mood was the Euro. Psychologically, a close last night below the 200-day moving average (1.1209) and a failure to break back above it this morning puts the September low at 1.1087 in the market's sights, but I think it would take a move back through 1.10 to signal that this is more than just noise.”

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