The US Dollar Index (DXY) year-to-date high of 109.29 was in sight (109.27) and close to being breached but the US housing data and the US PMI data provided a catalyst for a reversal. The US dollar reversed notably but is unlikely to prove lasting, in the view of economists at MUFG Bank.
Weak US data respite for the US dollar but it will be brief
“To us, the price action suggests the move was as much technical as it was fundamental. Yes, the correction was triggered by data that was weaker than expected but the failure of DXY to break above the YTD high level meant the dollar was already weakening ahead of the data release.”
“We doubt weak data from the US at this juncture will alter the course for the US dollar. The appreciation of the US dollar is being driven not by US economic strength but more the grim deterioration in the global growth outlook.”
“Europe due to the far bigger hit from energy and China due to a collapsed property sector and its zero-covid policy leaves the US dollar relative to the rest as the currency most in demand.”