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Dollar Weakens on Belief that Fed will Trail Behind

With equities climbing to a fresh yearly high, the sell-off in the U.S. dollar can be largely attributed to the improvement in risk appetite. This morning’s U.S. economic reports were mostly better than expected, lending credibility to the Federal Reserve’s recently upgraded growth and inflation forecasts. Central banks around the world have grown more optimistic about the outlook for their own economies and this optimism affected rate hike expectations. Last month, investors did not anticipate any tightening from the Federal Reserve this year but since then, 25 and almost 50bp of tightening is now being priced in. However even in this aggressive scenario, the Fed is still expected to trail behind the ECB and the BoE as both of these central banks are expected to raise interest rates by as much as 75bp before year’s end. This dynamic has led to underperformance in the U.S. dollar tha Read more text…

The Dollar Accelerates Through 78.00

This move has been one that has been setting up for some time: The U.S. Dollar Index’s slide through 78.00. The break through this psychological level confirmed the negativity of the dollar’s place in the world amidst a surging euro and worldwide equities risk appetite. However, the pierce of 78.00 did not attract the selling momentum that would be expected to have accompanied this move lower. The Fed was not able to curb dollar selling with last week’s rate statement and the dollar was left to rely of the bulls who would step in at 78.00 to 77.80 to stay supported.

The EUR/USD which has been climbing since the brief break through 1.3000 on January 10 finally has managed to take all that bullish sentiment and momentum and transition the 34EMA Wave into an uptrend. The G

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